By Min Zeng Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Prices of Treasury securities were higher Thursday, but their gains were pared following better-than-forecast weekly U.S. jobless claims and monthly durable goods reports. Treasury prices had rallied, sending the two-year note's yield to near a record low, as worries over the global economic outlook drove investors into what are considered safe assets. The Federal Reserve cast a more cautious outlook on the economic outlook Wednesday, raising speculation that the extremely low interest rate policy is likely to stay longer than many thought. Thursday's U.S. data releases eased some of the demand for Treasurys, pushing bond prices off their best levels of the day. The bond market is also bracing itself for a $30 billion sale in seven-year notes at 1 p.m. EDT, the last leg of this week's $108 billion new government notes supply. The Labor Department said in its weekly report Thursday that initial claims for jobless benefits fell 19,000 to 457,000 in the week ended June 19. Economists surveyed by Dow Jones Newswires had expected claims would fall by only 7,000. The previous week's level was revised slightly upward, to 476,000 from 472,000. Durable-goods orders, after five consecutive monthly gains, decreased by 1.1% to a seasonally adjusted $192.01 billion, the Commerce Department said Thursday. Economists surveyed by Dow Jones Newswires had forecast a decline of 1.5%. "We don't think [the durable goods report] really changes things, and the claims data remains quite elevated compared to other recoveries, but at these levels we'd feel better about selling," said David Ader, head of government bond strategy at CRT Capital Group LLC. As of 8:49 a.m. EDT, the price of the 10-year note was up 7/32 and the yield was down 2.5 basis points at 3.090%. The 30-year bond was 9/32 higher, with the yield down 1.6 basis points to 4.043%. The two-year note was up 1/32 and its yield down by 1.6 basis points to 0.660%. Bond yields move inversely to prices. The two-year note's yield has dipped from this year's peak of 1.189% set in early April. The yield has traded below 1% since May when the euro zone's debt crisis flared up. Investors increasingly fretted about the economic recovery in the second half of the year given the ongoing euro-zone debt troubles and as fiscal stimulus in the U.S. fades away. Yields on short-dated Treasurys are the most sensitive to changes in official rate policy outlook. With the prospects of low rate policy to stay, the two-year note's yield earlier Thursday fell to as low as 0.630%, the lowest level since November 2009, not far from its record low of 0.601% set in mid-December 2008 following the collapse of Lehman Brothers. "I don't believe it is a panic trade. But there is an increased concern for a double dip/deflation/Fed on hold until 2012 trade," said Ted Ake, head of Treasury and Agency trading in New York at Societe Generale SA. "With the uncertainty of Europe and weaker economic data, there just is no reason to expect higher rates yet." The Federal Open Market Committee on Wednesday held its key policy target rate at a record low near zero, a decision that it has kept since December 2008. Interest rate futures traders gave up bets on a rate hike by the end of this year and cut bets further on the first hike for early 2011. Long-dated Treasurys, on the other hand, benefited from the Fed's assessment that it sees the underlining inflation trend lower, reducing a main threat to such bonds' value over time. The longer the maturity, the more sensitive a bond's value to the rise in consumer prices. -By Min Zeng, Dow Jones Newswires; 212-416-2229; min.zeng@dowjones.com

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