* U.S. jobless claims fall more than expected * U.S. Q1 GDP growth rate rises * Focus on U.S. 7-year note auction (Adds analyst comments, updates prices) By Gertrude Chavez-Dreyfuss NEW YORK, May 27 (Reuters) - U.S. Treasury yields rose on Thursday, bolstered by a New York Times report saying President Joe Biden will announce on Friday a $6 trillion budget for 2022, the largest spending since the second world war, fueling supply concerns. Investors also sold Treasuries ahead of the government"s sale of $62 billion in 7-year notes later on Thursday. Bond dealers tend to sell Treasuries ahead of an auction to push yields higher so they can buy them at a lower price in a move called supply concession. The budget figure suggested that the U.S. government will be running deficits of more than $1.3 trillion through the next decade, according to the report. The report weighed on Treasury prices because it means the government would have to flood the market with more debt to finance the budget. "The supply fear is an easier thing to quickly price in. What traders view is the worst downside," said Steve Feiss, managing director, fixed income, at broker-dealer Etico Partners. "But when you take a moment to pause, you see that it"s only a proposal and it"s not a done deal. There will be some horse trading give and take." Thursday"s data on U.S. jobless claims and first-quarter gross domestic product growth also helped lift Treasury yields. Both reports showed the U.S. economy was on a stable path to recovery from the pandemic. Initial jobless claims dropped more than expected last week to a seasonally adjusted 406,000 for the week ended May 22, compared to 444,000 the prior week. That was the lowest since mid-March 2020 and kept claims below 500,000 for three straight weeks. A separate report confirmed U.S. economic growth advanced in the first quarter at a 6.4% annualized rate, the government"s second estimate for the period. That was unrevised from the estimate reported last month and followed a 4.3% growth rate in the fourth quarter. Investors are also awaiting the Treasury"s sale of U.S. 7-year notes later in the session, after strong 2-year and 5-year note auctions on Tuesday and Wednesday. The 5-year note specifically went well without concession. The 7-year note auction will be closely-watched after poor results in February and March, though there are signs the sale could yield strong results as well, analysts said. "Despite the lack of a setup for yesterday"s 5-year auction, the strong results point to solid demand for the belly of the curve even at these yield levels," said BMO Capital in a research note. In late morning trading, the U.S. 10-year Treasury yield rose to 1.618% from 1.574% late on Wednesday. U.S. 30-year yields were also up 2.298% from Wednesday"s 2.26%. Ahead of the auction, U.S. 7-year yields were up at 1.271% , compared with 1.23% on Wednesday. Speculation about the Federal Reserve potentially tapering its asset purchases continues to swirl in the market, as inflation rises and U.S. economy recovers. Fed vice chair for supervision Randal Quarles said late on Thursday he was ready to open talks on reducing some of the Fed"s emergency support for the economy, even if only to clarify the central bank"s plans. Quarles is the highest-ranking Fed official to begin making that case. May 27 Thursday 10:45AM New York / 1445 GMT Price Current Net Yield % Change (bps) Three-month bills 0.01 0.0101 0.000 Six-month bills 0.03 0.0304 0.000 Two-year note 99-243/256 0.1505 0.003 Three-year note 99-208/256 0.3136 0.011 Five-year note 99-160/256 0.8268 0.029 Seven-year note 99-220/256 1.2712 0.041 10-year note 100-16/256 1.6182 0.044 20-year bond 100-172/256 2.2082 0.038 30-year bond 101-172/256 2.2975 0.037 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.00 0.25 spread U.S. 3-year dollar swap 11.50 0.75 spread U.S. 5-year dollar swap 6.25 -1.50 spread U.S. 10-year dollar swap -4.25 0.00 spread U.S. 30-year dollar swap -29.75 0.00 spread (Reporting by Gertrude Chavez-Dreyfuss; Editing by Andrea Ricci and Emelia Sithole-Matarise) Our Standards: The Thomson Reuters Trust Principles.