By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices turned up on Thursday, pushing 10-year yields back down towards 2%, after a report showed U.S. first-time jobless claims unexpectedly rose to 380,000 in the latest week.
Coming up is the Treasury Department’s sale of 30-year bonds, the last of three major debt sales this week.
Yields on 10-year notes 10_YEAR -1.03% , which move inversely to prices, fell 2 basis points to 2.02%, heading back towards their lowest level in a month. A basis point is one one-hundredth of a percentage point.
Thirty-year-bond yields 30_YEAR -0.41% decreased 2 basis points to 3.18%.
Yields on 5-year notes 5_YEAR -1.70% traded at 0.87%, down 2 basis points and near their lowest level in more than a month.
Analysts noted that the Labor Department’s weekly claims figures are for the week that included Easter, which distorted that data. See story on jobless claims.
“It suggests a stall in the improvement and is consistent with prior weeks, so a bit of an alert,” said David Ader, head of government bond strategy at CRT Capital Group.
A separate report said producer prices were unchanged in March as energy prices retreated. Economists had predicted an increase. See more on PPI.
Last auction of the week
The government will sell $13 billion in 30-year bonds at 1 p.m. Eastern time. The auction is a reopening, meaning the notes sold carry the same maturity and coupon as the original issue, in this case sold in February. See recent Treasury auction results.
Analysts said demand may be weak as Federal Reserve officials haven’t backed away from speculation that the central bank may begin a new bond-buying program, which has been dubbed a third round of quantitative easing. They also have done nothing to support the notion that the Fed may extend its current bond-purchase program, known as Operation Twist, which is slated to end in June.
“We do expect muted demand for the 30-year bonds,” said bond strategists at Nomura Securities. “Twist buying is nearing its end, and there have been no clear signs of possible extension.”
Late Wednesday, the Fed’s number-two ranking official made the case for keeping interest rates low for some time, arguing the economy will continue to grow only gradually and that the unemployment rate will remain high for years.
Janet Yellen, the Fed’s vice chair, didn’t argue for a new round of asset purchases. Read story on Fed’s Yellen.
“Fed commentary from Yellen and [New York Fed President William] Dudley since last night was notable for its neutrality, not exactly endorsing the market’s view that QE3 is virtually a done deal,” said Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities. See more on Fed’s Dudley.
