MW: Treasurys jump as jobless claims tip deeper problems
Yield on two-year notes reaches record lows -- below 1%
NEW YORK (MarketWatch) -- Treasury prices surged Thursday, pushing yields on all maturities to multi-year lows, as investors reacted to Labor Department data showing initial claims for jobless benefits jumped more than expected to the highest since 1992.
Ten-year note yields dropped 15 basis points to stand at 3.19% after reaching the lowest since 2003. A basis point equals one one-hundredth of a percentage point.
Two-year note yields ) retreated as far as 0.95%, the lowest on record, and recently traded at 1%.
Yields on three-month bills , one of the most desirable securities in times of risk aversion, declined to 0.04%, not far above a record low.
Bond prices move inversely to their yields.
Weekly U.S. initial jobless claims rose by 27,000 to 542,000 in the week ended Nov. 15, the highest since July 1992, the Labor Department said.
And in a vivid indication of how it's getting more difficult to find a new job, continuing unemployment claims rose by 109,000 to 4.01 million in the week ended Nov. 8 -- the highest since the early 1980s. See Economic Report.
David Ader, head of government bond strategy at RBS Greenwich Capital, called the data "a shocker."
Yields on 30-year bonds also fell to 3.76% after touching the lowest ever: 3.70%.
"The long end of Treasurys is on fire," Andrew Brenner, co-head of structured products and emerging markets at MF Global, wrote in an e-mail.
Treasurys of all maturities have returned 6.8% so far this year, according to an index compiled by Merrill Lynch. The Standard & Poor's 500 Index has plunged 45% in 2008.
Bonds extended gains after the Federal Reserve Bank of Philadelphia said its diffusion index of manufacturing conditions in the region fell to negative 39.3 in November from negative 37.5 in October. Readings below zero indicate contraction.
Unbowed by auctions
Buyers were also not deterred after the Treasury Department said it plans to auction record amounts of two- and five-year notes next week.
The government will sell $36 billion in two-year notes on Monday and $26 billion in five-year debt on Tuesday.
The two-year amount matches the forecast of Wrightson ICAP, a research firm specializing in government finance, while the amount of five-year securities is $1 billion more than even they predicted.
