TREASURIES OUTLOOK-Prices tumble as expectations of British EU exit drop

* Polls boost expectations that Britain will stay in EU

* Fed rate policy likely to come back into focus

By Karen Brettell

NEW YORK, June 23 (Reuters) - U.S (Other OTC: UBGXF - news) . Treasury prices fell on

Thursday on growing confidence that Britain will vote to remain

in the European Union, as opinion polls indicated that the

campaign to stay in the EU was in the lead.

A telephone survey by polling firm ComRes, conducted for the

Daily Mail newspaper and ITV (LSE: ITV.L - news) television before voting commenced,

showed the "Remain" campaign had a 48 percent to 42 percent lead

over "Leave."

Another poll before voting began, by YouGov (LSE: YOU.L - news) for The Times

newspaper, showed "In" leading "Out" by 51 percent to 49

percent. A previous YouGov poll for The Times had put "Out"

ahead.

Crucially, undecided voters not captured in the polls are

seen as more likely to vote to stay in the EU than to risk the

unknown consequences of leaving.

That has boosted riskier assets, including stocks, and

reduced demand for U.S. bonds, which had rallied on Wednesday on

growing fears of a British exit.

"There's a very, very strong presumption that a lot of the

undecideds are going to break towards the status quo," said

Aaron Kohli, interest rate strategist at BMO Capital Markets in

New York.

Benchmark 10-year notes fell 15/32 in price to

yield 1.74 percent, up from 1.69 percent late on Wednesday.

Yields fell to an almost four-year low of 1.52 percent last

Thursday as fears over a British exit from the EU accelerated.

If Britain votes to remain in the EU, U.S. bond investors

are likely to turn attention back to when the Federal Reserve is

likely to next raise interest rates.

Unexpectedly weak jobs growth in May led investors to push

back rate increase expectations to later in the year, with

traders pricing in only an 8 percent chance of an increase at

the Fed's July meeting.

Improving economic data could lead investors to reevaluate

this view with shorter-dated notes, which are highly sensitive

to rate hikes, likely to bear the brunt of any weakness.

"If they vote to stay you will twos and threes repricing,

because the market will start looking towards July," said Kohli.

Data on Thursday showed that the number of Americans filing

for unemployment benefits fell last week to near a 43-year low,

suggesting labor market resilience.

Manufacturing activity rose to a three-month high in early

June while new single-family home sales dropped last month from

a more than eight-year high in April.

(Editing by Nick Zieminski)