NEW YORK: Treasury debt prices jumped on Thursday as stock market losses on Wall Street revived a bid for safe-haven US government debt ahead of the closely watched non-farm payrolls report.
Euro zone stocks also retreated and periphery sovereign bond yields widened after the European Central Bank kept rates on hold. At a news conference, European Central Bank President Mario Draghi later said the ECB was "technically ready" for negative rates, but gave no suggestion it was leaning toward such a move.
Markets were largely focused on what the US employment report might show on Friday and how that would impact the course of the Federal Reserve's monetary policy, specifically whether the US central bank could soon trim its quantitative easing stimulus program.
Ahead of the monthly US employment data, "there's fear of a softer payroll figure," said David Ader, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.
Economists polled by Reuters estimated US employers likely added 170,000 jobs in May, while the jobless rate remained unchanged.
A particularly strong payrolls number could push benchmark yields higher, but a poor figure could mean a slip in yields, perhaps even below 2 percent.
On Thursday, the benchmark 10-year Treasury note rose 13/32 in price, allowing its yield to fall to 2.05 percent from 2.09 percent late on Wednesday.
Buying in Treasuries also picked up when the 10-year yield moved below the low end of its recent range near 2.06 percent.
Thirty-year bonds rose 25/32, with yields slipping to 3.20 percent from 3.25 percent late on Wednesday.
"We tested the high end of the price range and low end of the yield range overnight last night," said Stone & McCarthy Research Associates fixed-income analyst John Canavan.
The low end of the range had been just above 2.06 percent for 10-year yields and 3.22 percent on 30-year yields.
The Fed bought $3.68 billion in Treasuries, part of its $85 billion a month program of large-scale purchases of US Treasuries and mortgage-backed securities aimed at keeping interest rates low to foster economic growth and employment.
New US jobless claims for the latest week came in much as expected, falling to 346,000, according to the Labor Department. The Reuters consensus forecast was 345,000.
The report briefly hurt bond prices in earlier trading because a healthier labor market could eventually lead to higher wage and inflation pressure and - more immediately - argue for the Fed to cut back on its large-scale bond purchases.
The weekly jobless claims count was "consistent with moderate (monthly) job gains in the 150,000 to 185,000 region," Ader said.
Fed policymakers want to see the unemployment rate fall to around 6.5 percent from its current 7.5 percent, with a sustained run of healthy jobs gains. They also want inflation to reach 2 percent. It has been running substantially beneath that.
The Fed will hold its next policy meeting on June 18-19.
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