NEW YORK: US Treasury debt prices fell on Thursday as several factors conspired to depress investors' appetite for safe-haven US government debt and keep the bond market on the defensive.
The government said US jobless claims edged lower week, holding near four-year lows, news that suggested the labor market was gaining momentum.
Shortly before that news was released, the International Swaps and Derivatives Association said Greece's recent moves to prepare for a debt restructuring had not triggered a payout on credit default swaps.
The ISDA committee had been asked to consider whether a "credit event" had occurred as a result of new Greek legislation that could force all bondholders to accept losses and after the European Central Bank took steps to avoid losses on its Greek bonds.
"If you're not going to have a CDS event provoked, there's less need for safe-haven debt so you might as well sell some Treasuries," said Cary Leahey, managing director and senior economist at Decision Economics in New York.
Benchmark 10-year notes were down 21/32, their yields rising to 2.05 percent from 1.97 percent late on Wednesday. The 30-year bond was down 1-13/32, its yield rising to 3.16 percent from 3.09 percent on Wednesday.
"The ruling from ISDA provided a bid to peripheral European debt while the safe havens, US Treasuries and German bunds, sold off," said Eric Stein, vice president and portfolio manager at Eaton Vance Investment Managers in Boston.
"There's been a significant improvement in some of the peripheral European debt markets," said John Canavan, market analyst at Stone & McCarthy Research Associates. "Italian and Spanish spreads, in particular, have narrowed."
Yields on French bonds also fell at an auction on Thursday suggesting cash from the European Central Bank's flood of cheap 3-year loans was boosting appetite for longer-term debt.
The French sale, following a 4.5 billion euro placement of shorter-term paper by Spain, came a day after the ECB injected 530 billion euros in funds into banks in the second of two operations that have eased concerns over Europe's debt crisis.
Those easing concerns are disadvantageous for safe-haven US Treasuries.
Another riskier asset class, stocks, opened higher on Wall Street. That weighed on safe-haven Treasuries, also, he said.
Besides "solid" auctions of Spanish and French debt after Wednesday's long-term refinancing operation (LTRO), China's purchasing managers' manufacturing index hit a five-month high, said William O'Donnell, head of US rate strategy at RBS in Stamford, Connecticut.
China's factories grew more than expected in February as new export orders for big firms bounced back, a government survey showed.
That followed a solid reading on manufacturing in the US Midwest reported on Wednesday, underscoring upbeat expectations for the nationwide Institute for Supply Manufacturing manufacturing index due at 10 a.m. ET (1500 GMT) on Thursday.
Encouraging the inclination to take profits was the "no real mention of QE3" from Federal Reserve Chairman Ben Bernanke in Congressional testimony he delivered Wednesday, O'Donnell said, referring to another potential stage of monetary easing.
"A segment of the market was saying QE3 was almost definite in the second quarter and Bernanke gave no hint of that," Leahey said. "He didn't even add higher oil prices to the list of risks the Fed is worried about. So a bunch of guys took profits and that has continued through this morning."
Still, Treasuries have not broken out of a range in place since early November, he noted.
"Many people are taking profits because you had a move from a little over 2 percent (in the 10-year yield) down to 1.9 percent," Leahey said. "There's been no significant change in the range so in terms of the technical behavior of the market, this move is not a game-changer."
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