By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices declined on Thursday, pushing yields up, after the Labor Department said fewer Americans filed initial jobless claims, and ISM's index on the state of U.S. manufacturing improved more than predicted, bolstering hopes that the U.S. economic recovery is gaining traction.
Yields on 10-year notes (UST10Y 3.86, +0.03, +0.76%) , which move inversely to prices, rose 4 basis points to 3.87%. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 1.03, +0.02, +1.98%) inched up 1 basis point to 1.04%.
First-time claims for unemployment benefits fell 6,000 to 439,000 in the latest week, a lower number than economists expected. Read about jobless claims.
The four-week average of initial claims and continuing claims, deemed a better gauge of employment trends, both declined.
Treasurys extended the decline after the Institute for Supply Management said its factory index rose to 59.6 in March from 56.5 in February, the highest reading since July 2004. See more on ISM.
Price action is likely to be subdued ahead of the government's monthly payrolls report on Friday, analysts said.
Most investors were "focused on the global stock rally and waiting for Friday's job report," said Thomas di Galoma, head of fixed-income rates trading at Guggenheim Partners.
Many markets will be closed for Good Friday, though U.S. bond markets will be open until noon.
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Also weighing on bonds, the Treasury Department said it will issue $82 billion in long-term and inflation-indexed debt next week.
The government will auction $8 billion in Treasury Inflation Protected Securities, or TIPS, on Monday. That will be followed by $40 billion in 3-year notes (UST3YR 1.58, +0.01, +0.89%) the next day, and $21 billion in 10-year notes on Wednesday.
The final sale will be of $13 billion in 30-year bonds (UST30Y 4.74, +0.03, +0.57%) on Thursday. The amounts are the same as in the most recent comparable sales and in line with analysts' estimates.
Last week, 10-year yields hit the highest level since last June after a poor reception to the government's note auctions, which was "a warning that the range highs in Treasury yields will be threatened, and probably broken, in the coming weeks," said strategists at RBS Securities.
"Global economic data looks more solid and consumer spending in the U.S. has held up well in the face of nasty weather," Bill O'Donnell, head of Treasury strategy at the firm, wrote in a note. "We're also still at peak levels of Treasury coupon supply."
