NEW YORK: US Treasuries prices rose on Thursday after a dovish outlook from the European Central Bank made US government debt more attractive than European counterparts but caution ahead of Friday's monthly US employment report limited gains.
The European Central Bank cut its inflation and growth forecasts for the euro zone and its president, Mario Draghi, said things could get worse.
The bank pledged to beef up or prolong its bond-buying program if the picture darkened further, although no one on the bank's Governing Council had argued for it now.
US Treasury yields followed German Bund yields lower. Benchmark 10-year Bund yields hit a session low of 0.73 percent, from 0.80 percent late Wednesday, while 10-year US yields hit a session low of 2.15 percent after yielding 2.19 percent late Wednesday. Yields move inversely to prices.
"Draghi was dovish," said David Ader, fixed income strategist at CRT Capital in Stamford, Connecticut.
Accommodative ECB monetary policy keeps European bond yields low and fuels demand for US Treasuries, which offer higher yields.
Hesitation ahead of Friday's US non-farm payrolls report for August capped gains in Treasuries prices.
Economists expect that US employers added 220,000 jobs in August, up from 215,000 in July, according to a Reuters poll.
Analysts said the report would be crucial to the Federal Reserve's decision on whether to raise interest rates at the US central bank's policy meeting later this month.
"Activity is going to be a little restrained by the employment report tomorrow," said Kim Rupert, director of fixed income at Action Economics in San Francisco, in reference to Thursday's muted price activity in the US Treasury market.
Benchmark 10-year Treasury notes were last up 5/32 in price to yield 2.17 percent.
US 30-year Treasuries were last up 9/32 in price to yield 2.95 percent after hitting a more than one-month high of 2.97 percent late Wednesday.
Two-year notes were last up 1/32 in price to yield 0.70 percent, from a yield of 0.72 percent late Wednesday.
Demand for safe-haven US Treasuries came even as riskier US stocks advanced after the ECB's statements and US economic data showing a strengthening economy.
The benchmark S&P 500 stock index was up 0.72 percent.
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