(Updates yields, adds analyst comments, reverse repo volume, breakeven rate) By Karen Pierog CHICAGO, July 1 (Reuters) - U.S. Treasury yields crept a little higher on Thursday as the market awaited the government"s June employment report for clues on how it might influence Federal Reserve monetary policy. The benchmark 10-year yield was last up 3.1 basis points at 1.4747%. On Wednesday, it tumbled to its lowest level since June 21 at 1.438% due mostly to quarter- and month-end demand. Friday"s closely watched U.S. Labor Department report is expected to show that nonfarm payrolls increased by 700,000 in June, after rising by 559,000 in May, according to a Reuters poll of economists. The unemployment rate is forecast to have fallen to 5.7%, from 5.8% in May. The Fed has been focusing on the labor market"s recovery as well as inflation as it contemplates when and how to roll back measures put in place last year to aid the coronavirus-battered economy. Anders Persson, chief investment officer of global fixed income at Nuveen, said while the Treasury market may be looking for direction from June jobs data, it and the Fed are likely to remain in a holding pattern until the trajectory of economic growth and inflation becomes clearer. "It"s going take a couple more months before we get that clarity in the data," he said. "I struggle to see that tomorrow is really going to change the narrative, including for the Fed." Still, yields may move around a bit in the short term after the report due to technical factors and light staffing on trading desks heading into the July 4th holiday weekend, Persson added. Ahead of Friday"s jobs report, the Labor Department said on Thursday that initial claims for state unemployment benefits dropped by a bigger-than-expected 51,000 to a seasonally adjusted 364,000 for the week ended June 26. Economists polled by Reuters had forecast 390,000 applications for the latest week. "The data continued to show the recovery intact and getting there slowly on the labor market," said Kim Rupert, managing director for fixed income at Action Economics in San Francisco. The Institute for Supply Management reported that U.S. manufacturing activity grew at a moderate pace in June, but employment contracted for the first time in seven months likely due to shortages of raw materials and labor. Meanwhile, the amount of cash flowing into the Fed"s overnight reverse repurchase operation eased to $742.6 billion on Thursday following Wednesday"s record high $992 billion. The breakeven inflation rate on five-year Treasury Inflation-Protected Securities rose to its highest level since early June at 2.515%. The two-year Treasury yield was last less than a basis point higher at 0.2566%. A closely watched part of the yield curve that measures the gap between yields on two- and 10-year Treasury notes was less than a basis point steeper at 121.64 basis points. The five-year note to 30-year bond yield curve was last 1.55 basis points flatter at 118.06 basis points. July 1 Thursday 3:13PM New York / 1913 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0475 0.0482 0.002 Six-month bills 0.05 0.0507 -0.005 Two-year note 99-189/256 0.2566 0.008 Three-year note 99-90/256 0.4713 0.016 Five-year note 99-224/256 0.9006 0.026 Seven-year note 100-8/256 1.2453 0.030 10-year note 101-96/256 1.4747 0.031 20-year bond 103-212/256 2.0152 0.019 30-year bond 106-128/256 2.0816 0.015 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 12.25 1.75 spread U.S. 5-year dollar swap 8.00 1.00 spread U.S. 10-year dollar swap -2.00 0.75 spread U.S. 30-year dollar swap -31.00 0.50 spread (By Karen Pierog; Editing by Andrea Ricci and Nick Zieminski) Our Standards: The Thomson Reuters Trust Principles.