NEW YORK: Yields on US Treasuries slipped on Thursday for the first time in four days after the outlook for sustained U.S. military involvement in Iraq and Syria and new planned sanctions against Russia drove modest safe-haven bids.
President Barack Obama said on Wednesday he had authorized U.S. airstrikes for the first time in Syria and more strikes in Iraq in a broad escalation of a campaign against the Islamic State militant group, raising concerns of a long-lasting war.
The president's speech raised expectations for what could be a "never-ending war," giving traders a reason to buy Treasuries after recent selling pressure, said Matthew Duch, portfolio manager at Calvert Investments in Bethesda, Maryland.
The U.S. and European Union's plan to stop billions of dollars in oil exploration in Russia by the world's largest energy companies including Exxon Mobil Corp and BP Plc also reignited concerns of tensions surrounding Russia and Ukraine.
Analysts said Treasuries were oversold in recent days following a study from the San Francisco Federal Reserve Bank on Monday showing that investors underestimated the speed at which the Fed might raise rates.
That study had fueled expectations the Fed would take a more hawkish bent on raising rock-bottom interest rates than previously expected at its next policy meeting on Sept. 16-17, resulting in benchmark 10-year yields hitting a more than one-month high and three-year yields closing at a more than three-year high in recent sessions.
"People are shifting their attention away from (the Fed) since we've already priced that in to some degree, and shifting their attention to the macro picture," said William O'Donnell, head U.S. Treasury strategist at RBS Securities in Stamford, Connecticut.
U.S. Labor Department data showing initial claims for state unemployment benefits increased 11,000 to a seasonally adjusted 315,000 for the week ended Sept. 6, the highest level since late June and above economists' expectations, supported safe-haven Treasuries prices.
"Even if it doesn't spur buying, it holds people off from selling the Treasury market or going short it," said O'Donnell of RBS, referring to the jobless claims data.
Analysts said traders had fully prepared for the Treasury's auction of $13 billion in 30-year bonds at 1 p.m. EDT (1700 GMT) in recent days by selling longer-dated Treasuries in anticipation of buying them back at cheaper prices, and that no selling pressure remained against the longer-dated debt.
U.S. 10-year Treasury notes were last up 2/32 to yield 2.53 percent, from a yield of 2.54 percent late on Wednesday. U.S. 30-year Treasury bonds were last up 6/32 to yield 3.26 percent, from a yield of 3.27 percent late on Wednesday.
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