NEW YORK: US Treasury debt prices rose on Thursday after falling for two straight sessions as worries about deflation in the euro zone prompted investors to seek safety in government debt.
Gains were more pronounced in US 10-year notes and 30-year bonds, with investors getting away from the short end of the curve and buying the long end on the expectation that the Federal Reserve will raise rates next year.
On Wednesday, the Fed said it has ended its bond-purchase program.
A stronger-than-expected US gross domestic product growth number for the third quarter did little to ease investors' aversion to risky assets. Analysts said GDP growth was boosted by defense-related spending and less by consumer and business expenditures, which market participants wanted to see.
"It's a beat, but GDP was propped up by defense spending," said Tom di Galoma, head of rates and credit trading at ED&F Man in New York.
"I still think the Fed is still a ways away from raising rates. The Fed will continue to drag its feet, not tighten, even though people think the Fed is ready to tighten." US Treasuries were further lifted by weak euro zone data that prompted a flight to German Bunds, with yields falling to a more than one-week low, analysts said.
In mid-morning trading, benchmark 10-year Treasury notes were up 9/32 in price and yielding 2.287 percent. Yields hit a three-week high of 2.362 percent on Wednesday after the Fed said the US economic recovery remained largely on track despite weakness elsewhere in the world.
US 30-year bond prices also rose, up 22/32 with a yield of 3.012 percent.
Treasury debt prices did pare gains after the first US GDP reading showed a 3.5 percent expansion in the third quarter, beating economists' expectations for a 3.0 percent rise.
A separate report from the Labor Department on Thursday showed first-time applications for unemployment benefits rose modestly last week, but remained at levels consistent with firming labor market conditions.
That also helped Treasuries briefly trim their gains.
At the short end of the curve, namely two-, three-and five-year notes, prices were mostly flat.
"There is a lot of repositioning on the yield curve going on because the Fed's statement was slightly hawkish," said ED&F's Di Galoma.
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