(Adds auction of $13 billion in 10-year TIPS) By Herbert Lash NEW YORK, May 20 (Reuters) - Yields on nominal U.S. Treasury debt and inflation-linked securities fell on Thursday after factory activity in the U.S. mid-Atlantic region slowed in May from a record pace, casting doubt on how fast the economy can continue to roar. Breakevens on 10-year Treausury inflation-protected securities, or TIPS, fell to a session low of 2.44% after the auction of $13 billion in 10-year TIPS securities. The Philadelphia Federal Reserve Bank said its business activity index fell to 31.5 from 50.2 in April, its highest pace in nearly half a century. The reading was shy of economists" expectations of 43.0, a Reuters poll found. The yield on benchmark 10-year Treasury notes fell 4.9 basis points to 1.634% and the breakeven rate on five-year U.S. Treasury Inflation-Protected Securities (TIPS) slid to 2.59%. Market expectations of a further rise in inflation would need evidence of the economy moving past full employment very, very rapidly, said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC. "We"ve probably already reached the peak level of economic activity, and that probably happened in March and April," Ricchiuto said. If you don"t "reach full peak employment very, very quickly, then you have to rethink, reset your overall expectations on the market," he said. The number of Americans filing new claims for unemployment benefits dropped further below 500,000 last week, suggesting job growth picked up this month. But companies are desperate for workers, which could affect how quickly the economy grows. Initial claims for state unemployment benefits totaled a seasonally adjusted 444,000 for the week ended May 15, compared to 478,000 in the prior week, the Labor Department said on Thursday. That was the lowest since mid-March 2020. Bond yields jumped on Wednesday after minutes of the Federal Reserve"s meeting in April mentioned a number of policymakers found "at some point" in the future discussion of adjusting the pace of bond purchases might be appropriate. The market"s reaction to "taper talk" was seen as knee-jerk but conjured memories of a volatile reaction to Fed efforts in 2013 to ease its accommodative stance at the time. The yield on the 30-year Treasury bond was down 5.1 basis points to 2.3357%. The 10-year TIPS breakeven rate was last at 2.445%, indicating the market sees inflation averaging just under 2.5% a year for the next decade. May 20 Thursday 1:09PM New York / 1709 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0075 0.0076 -0.007 Six-month bills 0.02 0.0203 -0.005 Two-year note 99-242/256 0.1532 -0.006 Three-year note 99-196/256 0.329 -0.024 Five-year note 99-170/256 0.8195 -0.043 Seven-year note 99-200/256 1.283 -0.050 10-year note 99-236/256 1.6335 -0.049 20-year bond 100 2.25 -0.055 30-year bond 100-216/256 2.3357 -0.051 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) GooU.S. 2-year dollar swap 9.75 -0.25 spread U.S. 3-year dollar swap 11.50 0.25 spread U.S. 5-year dollar swap 8.75 1.25 spread U.S. 10-year dollar swap -3.25 0.75 spread U.S. 30-year dollar swap -30.00 1.75 spread (Reporting by Herbert Lash; editing by Barbara Lewis, Kirsten Donovan) Our Standards: The Thomson Reuters Trust Principles.