NEW YORK: The prices of US Treasuries rose on Thursday, buoyed by clear dovish signals from the US Federal Reserve and more fears that the European debt crisis was heating up again.
But a strong report on durable goods orders in December slightly dampened Treasuries' rally.
Fed Chairman Ben Bernanke said on Wednesday the US central bank was ready to offer the economy additional stimulus after it announced it would likely keep interest rates near zero until at least late 2014.
The Fed also took the historic step of adopting an explicit inflation target, and many market participants came away thinking the chances of a new round of quantitative easing measures were high.
"The Fed kept the door open on QE3 and did so by reiterating its intent to use the balance sheet to help foster a recovery they continue to see as anemic," wrote David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut, in a note to clients on Thursday.
"The market responded with a vicious flattening rally which turned the bearish technicals back to bullish."
In Europe, Portuguese five- and 10-year government bond yields rose to euro-era highs on worries that the country may follow in Greece's footsteps and require a second bailout or restructure its debt.
While there were strong reasons to buy safe-haven US debt, price gains faded slightly after new orders for US manufactured goods rose more than expected in December on strong demand for aircraft, while a rebound in a gauge of business spending plans suggested investment closed the year on the upswing.
Jacob Oubina, senior US economist at RBC Capital Markets in New York, said the durable goods data suggested the manufacturing sector was entering 2012 with momentum.
"Heading into the first quarter, the momentum is going to be pretty decent," he said.
Good economic data is bad news for Treasuries, assets that thrive on crises and economic stagnation.
The benchmark 10-year Treasury note was last trading 7/32 higher in price and yielding 1.97 percent, down from 2 percent at Wednesday's close. The 30-year Treasury bond was up 9/32 in price for a yield of 3.13 percent, down from 3.15 percent late on Wednesday.
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