(Updates prices, changes byline, updates throughout) By Chuck Mikolajczak NEW YORK, July 8 (Reuters) - U.S. government bonds yields continued their recent decline on Thursday, with 10-year Treasury yields touching their lowest levels in nearly five months as investors worries persist that the best part of the economic recovery may be over. The yield on the 10-year note is on pace to decline for an eighth straight session, marking the longest streak since a nine-session drop that ended on March 3, 2020, as the COVID-19 pandemic in the United States was gaining speed. Recent data on the labor market and services sector has given investors pause that the economy may not be strengthening as initially anticipated and some underlying weakness may be emerging. On Thursday, initial jobless claims unexpectedly rose for the week, according to Labor Department data, although the broader trend continues to show improvement. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at 107.9 basis points after flattening to as small as 104.2, the most narrow since Feb. 12. "Once you get to the point where the curve is flattening too quickly, people then begin questioning the macro story altogether," said Steven Ricchiuto, U.S. chief economist at Mizuho Securities USA LLC in New York. Minutes from the Fed"s June 15-16 meeting showed central bank officials believed "substantial further progress" on the economic recovery had not yet been met, but agreed they needed to be prepared to act should inflation or other risks emerge. "The Federal Reserve, even though it was not bearish, it was a little bit bearish enough to force everything over the edge, which shows you that you had to be fully committed to this reflation trade for people to believe it," said Ricchiuto. Analysts have cited multiple reasons for growing concerns about the economic growth prospects and increasing risk-off sentiment, including the Delta variant of COVID-19, volatility in oil prices and a market that has been largely positioned short. The yield on 10-year Treasury notes was down 4.6 basis points to 1.275% after hitting a low of 1.25%, the lowest since Feb. 16. The yield on the 30-year Treasury bond was down 5 basis points to 1.894% after dropping to 1.856%, marking its lowest level since Feb. 2. July 8 Thursday 10:49AM New York / 1449 GMT Price US T BONDS SEP1 164-9/32 1 10YR TNotes SEP1 133-248/256 0-108/25 6 Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.000 Six-month bills 0.05 0.0507 -0.005 Two-year note 99-221/256 0.1944 -0.022 Three-year note 99-174/256 0.3598 -0.037 Five-year note 100-174/256 0.7356 -0.044 Seven-year note 101-96/256 1.0451 -0.048 10-year note 103-60/256 1.2745 -0.046 30-year bond 110-236/256 1.8942 -0.050 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 11.75 0.00 spread U.S. 5-year dollar swap 8.00 0.25 spread U.S. 10-year dollar swap -1.25 1.00 spread U.S. 30-year dollar swap -29.50 1.75 spread (Reporting by Chuck Mikolajczak Editing by Mark Heinrich) Our Standards: The Thomson Reuters Trust Principles.