Debt auction and news of more supply coming serve to limit gains Yields on 10-year Treasury notes touched their highest in five weeks Thursday, before the Federal Reserve steps back into the market to buy short-term debt. Price gains were limited as bond traders got ready for the government to auction inflation-indexed debt later in the session. The Treasury Department may also say it will sell nearly $100 billion next week. Two-year note yields declined 2 basis points, or 0.02%, to 0.95%. Ten-year note yields ) rose 1 basis point to 2.95%. They earlier touched the highest since mid-March, when the Federal Reserve announced plans to buy $300 billion in Treasurys to keep borrowing costs down. Bond prices move in the opposite direction of yields. Traders jockeyed ahead of the Federal Reserve's purchase of 3- and 4-year notes, which supported shorter-term securities. The central bank may try to buy about $3 billion in this operation, much less than the last time it bought debt maturing in 2012 and 2013, according to Morgan Stanley analysts. Treasurys recovered from small declines seen earlier after the Labor Department said first-time claims for jobless benefits rose to 640,000 in the latest week. Continuing claims reached a new record, indicating ongoing strains on finding a new job once unemployed. See full story. More economic data, expected to show that sales of existing homes slowed during March, is due at 10 a.m. Eastern time. Later, the government will sell $8 billion in Treasury Inflation Protected Securities maturing in five years. Bids are due at 1 p.m. Eastern time. The Treasury's likely to announce it will sell $40 billion in 2-year notes, $34 billion in 5-year debt and $25 billion in 7-year securities, according to Wrightson ICAP, a research firm specializing in government debt. "It's the supply that's coming that is the concern and the palpable disinterest by real money to buy into what's really been range-confined weakness," said strategists at RBS Greenwich Capital.

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