* U.S. housing starts fall, Philly Fed index declines

* U.S. yield curve reduces inversion

* U.S. rate futures price in one to two cuts this year

* U.S. $21 billion five-year TIPS auction shows strong demand

NEW YORK, June 20 (Reuters) - U.S. Treasury yields rose across the board on Thursday as investors continued to rebalance positions after last week's sharp decline on further evidence the world's largest economy is finally slowing down.

Investors are also looking ahead to next week's auction of about $183 billion in U.S. two-, five- and seven-year Treasury notes. They tend to sell Treasuries ahead of auctions to push up the yield before buying them back at a lower price, a practice called concession.

U.S. yields briefly came off their highs after Thursday's generally soft economic reports with the contraction in housing starts, a decline in the Philadelphia Federal Reserve business conditions index, and an increase in continuing jobless claims to 1.828 million in the latest week, the highest since January.

The initial weekly jobless claims, however, rose to 238,000, reversing about a third of the surge in the prior week, which had pushed up claims to a 10-month high.

"There's no doubt that the Fed is eager to lower interest rates," said Mark Heppenstall, president and chief investment officer at Penn Mutual Asset Management in Horsham, Pennsylvania, noting that the Fed believes monetary policy is restrictive enough.

"But economic data has been somewhat of a mixed picture so far this year. A lot of the diverging data points have left the Fed and some investors confused with regard as to what is exactly the next story," he added.

In afternoon trading, the benchmark U.S. 10-year yield rose 3.5 basis points (bps) to 4.251%.

The U.S. 30-year yield gained 3.7 bps to 4.390%.

The two-year yield was up 2.5 bps at 4.728%.

A strong auction of U.S. five-year Treasury Inflation-Protected Securities (TIPS) added to overall bids in Treasuries, pushing yields off their highs.

The auction stopped at a

high yield of 2.05%

, below expectations, suggesting that demand for inflation protection was robust and investors did not seek a premium to purchase the note.

The bid-to-cover ratio, a measure of demand, was 2.52, down marginally from 2.58 at the previous auction, but in line with the 2.51 average.

U.S. five-year TIPS yields have declined more than 20 basis points since hitting one-month peaks in late May. Post-auction, the yield was slightly lower at 2.053% .

In other parts of the bond market, the U.S. yield curve became less inverted on Thursday. An inverted yield curve has historically preceded past recessions. The curve between the U.S. two- and 10-year yields was minus 47.9 bps, compared with minus 49.3 bps late on Tuesday.

The curve is a "bear steepener," a scenario in which long-term rates are rising more steeply than shorter-dated ones. This often happens when the market thinks inflation could pick up, likely delaying the start of the Fed's easing cycle.

These curves can change daily depending on market volume, flow of funds and economic data.

Following Thursday's economic data, fed funds futures slightly pared the chances of easing in September to 64%, from about 67% late on Tuesday, according to LSEG's calculations. The market is also pricing one to two rate cuts of 25 bps each this year.

Minneapolis Fed President Neel Kashkari said on Thursday it would take a year or two to get inflation back to 2% as wage growth might still be a bit too high, fueling concerns interest rates could remain elevated for some time.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Richard Chang)