By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- Treasury prices turned higher Thursday after a trio of weak economic reports soured hopes of an economic rebound and weighed on stocks, increasing the relative appeal of U.S. debt. "The markets are reacting to the reality that a V-shaped recovery was a pipe dream," said Keith Springer, president of Capital Financial Advisory Services. "The big question now is whether we are simply in a slow growth atmosphere or a downright negative growth environment." Yields on 10-year notes (UST10Y 2.90, -0.04, -1.30%) decreased 3 basis points to 2.90%. The 10-year yield closed Wednesday at the lowest level since April 2009. Bond yields move inversely to prices and a basis point is 0.01%. Yields on 2-year notes (UST2YR 0.62, +0.01, +1.98%) were little changed at 0.61%. The yield closed at 0.609% on Tuesday, the lowest level on record. Thirty-year bond yields (UST30Y 3.85, -0.05, -1.18%) also fell, by 5 basis points to 3.85%. The rally may be limited as "after such a large run lower in yields, there are no real sellers, just a slowing down of buying, which is why yields are grinding lower," said George Goncalves, bond strategist at Nomura Securities. The Labor Department said earlier that initial claims for U.S. jobless benefits rose to 472,000 last week, up 13,000. Economists surveyed by MarketWatch had expected first-time claims to fall to 455,000 on the week. Read more on jobless claims. The claims data come one day before the Labor Department's monthly report on joblessness and nonfarm payrolls, one of the most closely watched economic reports on the calendar. Economists surveyed by MarketWatch expect the government to say on Friday the economy lost 130,000 jobs in June, including the loss of some 230,000 temporary workers hired by the Census Bureau. Yields on 10-year notes (UST10Y 2.90, -0.04, -1.30%) decreased 3 basis points to 2.90%. The 10-year yield closed Wednesday at the lowest level since April 2009. Bond yields move inversely to prices and a basis point is 0.01%. Yields on 2-year notes (UST2YR 0.62, +0.01, +1.98%) were little changed at 0.61%. The yield closed at 0.609% on Tuesday, the lowest level on record. Thirty-year bond yields (UST30Y 3.85, -0.05, -1.18%) also fell, by 5 basis points to 3.85%. The rally may be limited as "after such a large run lower in yields, there are no real sellers, just a slowing down of buying, which is why yields are grinding lower," said George Goncalves, bond strategist at Nomura Securities. The Labor Department said earlier that initial claims for U.S. jobless benefits rose to 472,000 last week, up 13,000. Economists surveyed by MarketWatch had expected first-time claims to fall to 455,000 on the week. Read more on jobless claims. The claims data come one day before the Labor Department's monthly report on joblessness and nonfarm payrolls, one of the most closely watched economic reports on the calendar. Economists surveyed by MarketWatch expect the government to say on Friday the economy lost 130,000 jobs in June, including the loss of some 230,000 temporary workers hired by the Census Bureau. Treasurys turned notably higher after the Institute for Supply Management's manufacturing index fell to 56.2 in June from 59.7 in May, more than many analysts anticipated. A separate report showed pending home sales fell 30% in May. See more on ISM. It's "another round of disappointing data for the U.S. economy," said strategists at CRT Capital Group. "The Treasury market found meaningful support." Quarter in review In June, Treasurys of all maturities returned 1.87%, adding to a 5.88% gain in the first half of the year, according to an index compiled by Bank of America Merrill Lynch. It was the sector's best start to a year since 1995. Treasurys gained 4.72% in the last three months. By comparison, the S&P 500 Index (SPX 1,021, -9.65, -0.94%) lost 11.9% last quarter, the worst drop since the fourth quarter of 2008, when the financial system really unraveled. On Thursday, the index fell another 1.6%. Corporate bonds also had a good month and first half, rising 2.06% in June and up 6.09% in so far in 2010, according to Bank of America. Those gains came even as companies struggled to access the debt markets as the sovereign debt crisis in Europe weighed on most asset classes deemed to carry extra risks. Read about corporate bond sales. For July, companies are expected to sell fewer bonds, even as the cost to borrow remains relatively low, thanks to the Treasury rally. Companies are expected to sell $49.75 billion in debt this month, according to a survey conducted by Informa Global Markets.

Source