Worries about Greece, global growth feed demand for U.S. bonds By Deborah Levine, MarketWatch NEW YORK (MarketWatch) — Treasury prices extended gains on Thursday, pushing yields down for the first day in five, after a report showed U.S. jobless claims rose more than economists’ expected in the latest week. The data added to worries about Greece’s willingness to make necessary budget cuts and slowing growth elsewhere in the world, increasing the appeal of the relative safety of U.S. debt. Yields on 10-year notes 10_YEAR -1.65% , which move inversely to prices, fell 7 basis points to 2.91%. A basis point is 1/100 of a percentage point. Yields on 2-year notes 2_YEAR -4.27% declined 4 basis points to 0.34%, bouncing off of a new all-time low of 0.27%, according to FactSet Research. Thirty-year bond yields 30_YEAR -0.76% fell 6 basis points to 4.16%. The Labor Department said first-time claims for unemployment benefits rose by 9,000 to 429,000 in the week ended June 18. See story on jobless claims. Economists surveyed by MarketWatch expected claims to rise by 1,000 to an unrevised 415,000. “The storyline is simply that the encouraging labor market recovery in the first few months of this year appears to have lost steam,” said Millan Mulraine, TD Securities’ economics strategist. “While we expect the pace of recovery to pick-up in coming months, employment growth in June should be subdued relative to trend.” Data from China and Europe weighed on the euro and U.S. stock futures before the claims report, as well as comments from European officials and some rising concerns about the upcoming vote in Greece’s parliament on budget cuts needed to obtain the next tranche of international aid package and avoid a default by the debt-laden nation. Read about dollar, Greece. The improvement in bonds and the fall in stocks before the data were attributed to reasons that “surely include Greece and Europe uncertainty, where this morning we hear that the austerity plan to be voted on won’t deliver all its supposed to,” said bond strategists at CRT Capital Group. Fed redux Analysts also noted a change in what global investors focused on from the Federal Reserve’s policy statement and Chairman Ben Bernanke’s press conference late Wednesday. See Wednesday’s Bond Report. As predicted, the Fed lowered its growth forecasts but also reiterated it wasn’t worried about inflation accelerating. But Bernanke’s uncertainty about his outlook after the majority of the Fed’s bond-buying program is done made many investors feel the need to be more cautious. “It remains a wide open question what the U.S. economy is really made of once the seasonal factors and auto rebound give a temporary lift to the data in the next few months,” Bill O’Donnell, head of Treasury strategy at RBS Securities, wrote in a note to clients. “Can the U.S. economy stand on its own without the training wheels of public largesse? Your and my guesses (I am very worried) are as good as the Fed’s on this one.” Still to come are data on new home sales, a Fed buyback and the Treasury Department’s announcement of how much in debt it will auction next week. Strategists at Nomura Securities expect the government to again sell $35 billion in 2-year and 5-year notes and 29- billion in 7-year notes. Also, at 1 p.m. Eastern time, the government will sell $7 billion in 30-year inflation-linked bonds. See recent bond auction results.

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