Longer-term debt weighed by coming bond sales, stimulus plan Treasurys of most maturities made gains Thursday as bond traders played off government data that showed lower orders for durable goods in December as well as initial claims for jobless benefits filed last week rising more than predicted. Two-year note yields fell 4 basis points to stand at 0.88%. A basis point is 0.01%. Bond prices move inversely to their yields. Providing fresh grist for traders, the Labor Department said first-time claims for unemployment benefits rose to 588,000 in the week ended Jan. 24. Continuing claims also rose, reaching a record 4.78 million, as concerns about the U.S. labor market deepen. See claims story. The data "tell us that the payroll trajectory is deteriorating further," said Ray Stone, co-founder of Stone & McCarthy Research Associates. "The outlook is for significant additional job losses, probably about 2.5 million or so over the next six months." 'The long end is going to test the downside to find what at level the Fed responds and puts a ceiling on rates.' — Tom Tucci, RBC Capital Markets It also signals this recession may be more severe than the 2001 or 1990-1991 periods, and possibly even worse than in 1981-1982, he wrote in a research report. Concern that the economy continues to deteriorate led Federal Reserve policy makers on Wednesday to repeat that they expect to keep their target for interest rates low for some time, providing support for short-term debt. A separate government report issued earlier Thursday said orders for durable goods fell 2.6% last month compared with November. This was worse than the 2% decline predicted by economists surveyed by MarketWatch. See durables story. Also, the Commerce Department said new-home sales plunged 14.7% in December to a seasonally adjusted annual rate of 331,000, a record low. See full story. Meanwhile, the Senate's expected to gear up for consideration of the economic-stimulus package pushed by the Obama administration. An $819 billion stimulus bill passed the House late Wednesday, largely on a party-line vote. See full story. This focused traders' attention on the benchmark 10-year note, yields for which rose 1 basis point to 2.68%. "People are trying to determine how that is going to be paid for," said Tom Tucci, head of U.S. government bond trading at RBC Capital Markets. Some of the market's activity may also be a response to the Fed's statement late Wednesday that it is preparing to but longer-term Treasurys if such a move would be effective in improving credit markets. "Markets are like my children: they want instant gratification," said Tucci. "The long end is going to test the downside to find what at level the Fed responds and puts a ceiling on rates." Pressure also came from the run-up to the U.S. Treasury's auction of a record $30 billion in five-year notes, the last major sale of the week. Yields on the most recently issued five-year note fell 1 basis point to 1.69%. The government's $40 billion sale of two-year notes, also the largest amount ever sold at once, met with strong demand on Tuesday. The reception for the $8 billion in 20-year inflation-indexed securities sold on Monday had proved more tepid. The Treasury will announce on Feb. 4 how much in three-year, 10-year and 30-year debt it will sell the following week. The government also may decide to sell seven-year notes for the first time since 1993, analysts say.

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