U.S. government debt prices were mixed on Thursday after data suggesting less tightness in the labor market offset downward pressure from worries over rising global interest rates.
A larger-than-expected 10,000 rise in weekly data for jobless claims benefits fueled hopes that the Federal Reserve would trim interest rates later this year, lifting shorter-dated Treasuries which are more sensitive to the market's outlook on Fed policy.
It was a little higher than expected, John Jansen, director of fixed-income sales at CastleOak Securities in New York, said of the latest claims report. There's a bit of risk aversion going on.
Investors have been reducing their holdings of risky bonds, especially in subprime mortgages, amid problems at two hedge funds managed by Bear Stearns, traders said.
That has spurred safety bids into Treasury securities, but that has been upstaged by a heavy unwinding of Treasuries by investors who are worried about an ongoing spike in longer-dated yields, they said.
They may be long too many 10-year equivalents, said Thomas di Galoma, head of Treasury trading at Jefferies & Co. in New York. This poises a risk for Treasuries.
Benchmark 10-year notes traded down 1/32 in price for a yield of 5.14 percent, flat from late on Wednesday. Ten-year yield reached a five-year peak above 5.30 percent during last week's market rout.
Among shorter maturities, two-year Treasury notes were up 2/32 in price for a 4.94 percent yield versus 4.98 percent late Wednesday.