TREASURIES-Bond yields dip on weak U.S. durable goods, services sector data

* U.S. durable goods orders fall in August

* U.S. services sector data slips in September

By Sam Forgione

NEW YORK, Sept 25 (Reuters) - Long-dated U.S. Treasuries yields fell to their lowest in over two weeks on Thursday after weak U.S. durable goods orders and services sector growth cast doubt on the strength of the U.S. economy and fueled safe-haven bids.

The Commerce Department said durable goods orders, for items ranging from toasters to aircraft that are meant to last three years or more, dropped 18.2 percent in August, the largest decline since the series started in 1992.

While the figure was close to economists' expectations for an 18 percent drop according to a Reuters poll and durable goods orders excluding transportation rose 0.7 percent, it drove home concerns about the U.S. recovery.

"It is unacceptable for an economy the size of the U.S. to have this sort of volatility," said George Goncalves, head of rates strategy for Nomura Securities in New York. "Whenever you get these blips in the radar, it looks out of form."

In addition, the flash services sector Purchasing Managers Index compiled by information services company Markit (Stuttgart: A1139A - news) slipped to 58.5 in September from 59.5 in August, declining for a third straight month. A Reuters poll forecast the September reading at 59.0.

"We see the U.S. economy as positive, but not showing the pace of growth that was anticipated," said Ellis Phifer, market strategist at Raymond James in Memphis, Tennessee. He said the weak data prevented traders from selling 7-year notes ahead of the Treasury's auction of the debt later in the session.

Traders typically sell debt ahead of auctions to make room for new supply.

Long-dated Treasuries yields rose the most, while short-dated yields were mostly flat on lingering fears that the Federal Reserve will hike rates at a faster pace than previously anticipated, as the central bank's latest projections on Sept. 17 indicated.

"The dots are still playing mind games with investors," said Goncalves, in reference to the forecasts of individual Fed policymakers. "There's always that risk that the Fed goes faster."

Labor Department data showed U.S. initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 293,000 for the week ended Sept. 20, below expectations for a rise to 300,000 according to a Reuters poll.

While the data suggested an acceleration in job growth in September, analysts said it had little impact on Treasuries.

Benchmark U.S. 10-year Treasury notes were last up 12/32 in price to yield 2.52 percent, from a yield of 2.57 percent late Wednesday. U.S. 30-year Treasury bonds were last up 29/32 to yield 3.236 percent, from a yield of 3.28 percent late Wednesday. The yield hit 3.23 percent, its lowest since Sept. 10.

On Wall Street, U.S. stocks fell on the mixed economic data. The S&P 500 was last down 0.89 percent. (Reporting by Sam Forgione; Editing by Meredith Mazzilli)