(Adds latest market activity) By Ross Kerber Aug 5 (Reuters) - U.S. Treasury yields rose on Thursday as risk sentiment improved after a healthy jobless claims report, a day ahead of more detailed employment data. The benchmark 10-year yield was up 3.8 basis points at 1.2219%. Labor Department figures showed initial claims for state unemployment benefits fell last week, while layoffs dropped to their lowest level in 21 years in July as companies held on to their workers amid a labor shortage. The department"s closely watched July employment report is due for release on Friday. Stock indexes rose after the report and bond yields seemed to move in tandem, said Subadra Rajappa, head of U.S. rates strategy for Societe Generale. She cited "an improvement in risk sentiment overall." The pace of job creation will be a key indicator for U.S. Federal Reserve officials deciding how quickly to taper bond-buying programs that have propped up markets throughout the COVID-19 pandemic. Central bank officials will want to see employers adding between 500,000 and 1 million jobs a month in order to be able to announce the start of a taper late this year, Rajappa said. The trading moved higher 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. It was at 102 basis points, about 2 basis points higher than Wednesday"s close The yield on 10-year Treasury Inflation Protected Securities was -1.102% after setting a record low of -1.216% on Wednesday. The 10-year TIPS break-even inflation rate was at 2.327%, lower than on Tuesday. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was up 2 basis points at 0.202%. August 5 Thursday 4:08PM New York / 2008 GMT Price Current Net Yield % Change (bps) Three-month bills 0.0525 0.0532 0.002 Six-month bills 0.05 0.0507 0.000 Two-year note 99-217/256 0.202 0.020 Three-year note 99-254/256 0.3777 0.038 Five-year note 99-134/256 0.7225 0.049 Seven-year note 99-232/256 1.0139 0.048 10-year note 103-180/256 1.2219 0.038 20-year bond 108-12/256 1.766 0.022 30-year bond 111-168/256 1.8631 0.022 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.25 0.50 spread U.S. 3-year dollar swap 12.00 0.50 spread U.S. 5-year dollar swap 8.75 0.25 spread U.S. 10-year dollar swap 2.25 0.50 spread U.S. 30-year dollar swap -26.00 0.25 spread (Reporting by Ross Kerber in Boston Editing by Matthew Lewis) Our Standards: The Thomson Reuters Trust Principles.