By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- Treasury prices turned higher on Thursday, pushing yields down, after the Philadelphia Federal Reserve's manufacturing index unexpectedly turned negative this month. Yields on 10-year notes (UST10Y 2.59, -0.05, -1.82%) , which move inversely to prices, fell 3 basis points to 2.60%, after being up 4 basis points before the data. A basis point is 0.01%. Yields touched the lowest since March 2009 earlier this week. Yields on 2-year notes (UST2YR 0.49, -0.01, -1.61%) were little changed at 0.49%, after reaching to lowest level in history earlier this week. The Philly Fed diffusion index fell to negative 7.7 in August from 5.1 in July. Economists polled by MarketWatch were expecting the index to rise to 7.0. Factory activity has been a major boost to the U.S. recovery, but analysts have been concerned that other sectors of the economy may not be able to take over and keep growth upwards. "As much of the economy remains mired in a slump, there simply isn't enough force to compensate should manufacturing weaken further," said Dan Greenhaus, chief economic strategist at Miller Tabak. "Unfortunately, that is exactly what we expect." Treasurys pared losses followed a report from the U.S. Labor Department showing the number of Americans filing for first-time jobless benefits in the latest week unexpectedly rose to 500,000. Read about jobless claims. A rise in jobless claims may lead some economists to downgrade their forecasts for the government's monthly payrolls report. Also, the Conference Board said its leading economic index rose 0.1% in July. See more on leading indicators. Also limiting Treasurys losses may be anticipation for the Federal Reserve's second U.S. debt purchase operation, expected to be completed by late morning. The Federal Reserve Bank of New York will purchase Treasurys maturing from 2016 to 2020, the second of a series announced by policy makers last week. The Fed is reinvesting cash from maturing mortgage debt back into the bond market to keep its balance sheet steady and buoy the economy. The market rallied pretty significantly since the Fed's announcement of the purchases, which are done as open market operations. See results of recent operations. At 11 a.m. Eastern time, the government will announce how much debt it will auction next week. The Treasury Department is expected to sell $36 billion in 2-year debt, $36 billion in 5-year notes (UST5YR 1.40, -0.03, -2.37%) and $28 billion in 7-year notes (UST5YR 1.40, -0.03, -2.37%) , according to RBS Securities, one of the 18 primary government securities dealers required to bid at auctions. The 2-year-note sale would be $2 billion smaller than last month, while the others would be $1 billion less than last month's sale -- effectively continuing a trend of smaller auctions as the government has more clarity about its financing needs. The government will also announce it will sell $7 billion in 30-year Treasury Inflation Protected Securities, or TIPS, according to RBS. Finding a footing Still, some analysts note that trading has been choppy in recent days, defying any trend and pointing to a balance before potentially rallying further. "Such two-way choppy action at the highs does have the hallmarks of a market that has found a 'footing' yield-wise and is by definition more balanced," said David Ader and Ian Lyngen, strategists at CRT Capital Group, in a note. Short-term technical indicators are stretched, making it hard for the market to rally continuously, said strategists at RBS. Many big bond investors are still underinvested in Treasurys, according to recent surveys, they noted. That has led to buying interest, especially in longer-term debt. "Outright, there are buyers still even on small dips," said RBS' Bill O'Donnell. "If this changes, the market consolidation can turn into more of a correction, but as of yet it has not changed. It doesn't feel bubbly to me yet." "Ongoing demand will have us in a range surrounding 2.75% 10-year yields," he said.

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