By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) — Treasury prices struggled to hold gains Thursday before the Treasury Department’s sale of 30-year bonds, the last of three major debt sales this week.
Bonds gained briefly after pair of reports pointed to stronger economic growth in the first quarter, though first-time filings for jobless benefits jumped in the latest week.
Yields on 10-year notes 10_YEAR +0.05% , which move inversely to prices, traded at 2.04%, erasing a fall to 2.01% that had taken yields toward their lowest level in a month. A basis point is one one-hundredth of a percentage point.
Two-year yields 2_YEAR -1.36% stayed down 1 basis point to 0.29%.
Thirty-year-bond yields 30_YEAR +0.19% also erased a declined to sit little changed at 3.20%.
Yields on 5-year notes 5_YEAR +0.34% traded at 0.89%, after also falling toward their lowest level in more than a month.
The Labor Department’s tally of initial jobless claims unexpectedly rose to 380,000 in the latest week. Analysts noted the figures are for the week that included Easter, which they said distorted the 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.
The Commerce Department also said the trade deficit narrowed sharply in February by the most in two years, which led to upward revisions in estimates of growth in U.S. gross domestic product for the quarter. See story on trade deficit.
A separate report said producer prices were unchanged in March as energy prices retreated. Economists had predicted an increase. See more on PPI.
Treasury prices fell on Wednesday, pushing yields up for the first session in six, following a rally that reversed a recent selloff on the heels of the Federal Reserve’s March policy meeting and what appears to be a temporary relief of worries about Europe’s sovereign-debt debacle. See Wednesday’s bond column.
Last auction of the week
Potentially weighing on bonds Thursday, traders are positioning themselves for the government’s sale of $13 billion in 30-year bonds at 1 p.m. Eastern time.
Traders often try to push prices down ahead of an auction to get a better deal.
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.
The amount sold at reopenings has held steady since late 2009.
At the last four reopening of 30-year bonds, bidders offered to buy an average of 2.82 times the amount of debt sold, according to CRT.
Indirect bidders, a group that includes foreign central banks, bought 30.5% of recent sales, on average.
Direct bidders, a group that includes domestic money managers, purchased another 18.2% on average.
Analysts said demand may be weak as a string of Federal Reserve officials, in their public remarks, 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, or QE3.
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 second-ranking official made the case for keeping interest rates low for some time, arguing the that economy will continue to grow only gradually and that the U.S. unemployment rate will remain high for years.
Janet Yellen, the Fed’s vice chair, didn’t argue for a new round of asset purchases, however. 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.
