By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices extended gains on Thursday after a report showed more Americans filed first-time jobless claims in the latest week than some analysts expected, adding to the pile of data pointing to a slowdown in the economy.
Yields on 10-year notes 10_YEAR -2.79% , which move inversely to prices, declined 4 basis points to 2.26%, from 2.29% before the report. A basis point is 1/100th of a percentage point.
Yields on 2-year notes 2_YEAR -12.97% fell 4 basis points to 0.20%, erasing a two-day rise.
Thirty-year bond yields 30_YEAR -1.43% decreased 2 basis points to 3.63%.
Still to come is the Treasury Department’s auction of 7-year notes 7_YEAR -4.23% , the final major auction of the week.
Treasurys gained ground after the Labor Department said 417,000 Americans filed first-time claims for unemployment benefits in the latest week, though the numbers were skewed higher by the labor dispute at Verizon Communications VZ -0.84% . See story on jobless claims.
More signs of weakness in the economic data could raise expectations that the Federal Reserve will ride to the rescue, with Fed Chairman Ben Bernanke announcing some new measures — bond buying or otherwise — to arrest the decline. That speculation has been behind the rise in stocks earlier in the week, though analysts have said all week that Bernanke won’t say anything dramatic and markets risked disappointment. Read more on Bernanke, Jackson Hole.
But the data has still been bad enough to be a good environment for buying Treasury bonds and for the Fed to keep interest rates low.
“Sentiment around Friday’s Bernanke speech moved closer to our core view, that he will not announce new policy but flesh out the reasoning behind the Aug. 9 policy change and lay out options for possible further accommodation,” said John Briggs, a bond strategist at RBS Securities.
“The chairman will, in part, be explaining in greater depth the reasoning and decisions behind holding the fed funds rates at zero for two years,” Briggs said. “How can that not be dovish?”
