TREASURIES-Prices fall on strong data, ahead of supply

(Adds details on the Ukraine, updates prices)

* Prices fall as data points to bullish economy

* Treasury to sell $96 bln new supply next week

* Bond market to close early Thursday, closed Friday

* Treasury sells $18 bln, 5-year TIPS

By Karen Brettell

NEW YORK (Frankfurt: HX6.F - news) , April 17 (Reuters) - U.S. Treasuries prices fell

on Thursday as data pointed towards a strengthening economy, and

as traders prepared for $96 billion in new coupon-bearing supply

next week.

Initial claims for state unemployment benefits ticked up

2,000 to a seasonally adjusted 304,000 for the week ended April

12, the Labor Department said on Thursday. They stayed close to

a 6-1/2 year low touched the prior week.

The Philadelphia Federal Reserve Bank also said factory

activity in the U.S. mid-Atlantic (Frankfurt: 98S.F - news) region picked up in April at a

faster clip than expected. Its business activity index rose to

16.6 from 9.0 in March, topping economists' expectations for

10.0, according to a Reuters poll.

"Winter weather disruptions are being reversed with gusto,"

said Michael Englund, chief economist at Action Economics in

Boulder, Colorado.

The data comes a day after Federal Reserve Chair Janet

Yellen took an optimistic tone on the economy but also stressed

that interest rate increases, still far away, will depend on

employment and inflation targets.

"There is follow through from yesterday, there was

significant selling in the middle of the curve," said Tom Tucci,

head of Treasuries trading at CIBC in New York.

Low liquidity before the early close is likely adding to the

price pressure, he said.

The bond market closes at 2:00 p.m. EDT (1800 GMT) on

Thursday and will be shut Friday for the Good Friday holiday.

Five-year and seven-year notes, which are the most sensitive

to interest rate policy, have underperformed in recent sessions,

which some traders attribute to a large investor selling the

notes and buying 30-year bonds in a readjustment of a position

betting on changes in the Treasuries yield curve.

"There was a large buyer of bonds and seller of notes in the

middle of the curve," said Tom Di Galoma, head of fixed income

rates at ED&F Man Capital Markets in New York.

The relative cheapening of the intermediate-dated notes may

help attract demand to next week's debt auctions. The U.S.

government will sell $32 billion in two-year notes on Tuesday,

$35 billion in five-year notes on Wednesday and $29 billion in

seven-year notes on Thursday.

"I think demand will pick up for the five-year sector, the

middle of the curve has gotten beat up over the last five

trading days due to the yield curve flattening," said Di Galoma.

He sees yields continuing to rise into next week's supply and

April's employment report, which will be released the following

week.

Bonds extended price losses after the United States, Russia,

Ukraine and the European Union on Thursday together called for

an immediate halt to violence in Ukraine, where Western powers

believe Russia is fomenting a pro-Russian separatist movement.

Five-year notes were last down 12/32 in price to

yield 1.74 percent, up from 1.66 percent late on Wednesday.

Seven-year notes fell 19/32 in price to yield 2.30

percent, up from 2.21 percent.

Benchmark 10-year notes dropped 25/32 in price

to yield 2.73 percent, the highest in a week, up from 2.64

percent.

The yields have risen from one-and-a-half month lows of 2.60

percent on Tuesday, when concerns about escalating tension in

Ukraine sparked safety buying and a weak New York manufacturing

survey raised fears over the strength of the U.S. recovery.

Thirty-year bonds fell 1-10/32 in price to yield

3.52 percent, up from 3.45 percent.

The Treasury also sold $18 billion in five-year Treasury

inflation-protected securities, or TIPS, on Thursday to strong

demand from indirect bidders, which includes many fund managers

and other firms.

The notes were sold at high yield of minus-0.213 percent,

more than 5 basis points below where it had traded before the

auction, and indirect bidders took the highest ever share, based

on available data going back to 2004.

(Editing by Chizu Nomiyama and Bernadette Baum)