Longer-dated prices slip, but safety bid remains

NEW YORK: US Treasury prices slipped on Thursday ahead of a weekly report on jobless claims, but losses were tempered by continued selling in stock futures amid more worries about Europe.

Stock futures showed expectations of a drop in the major indexes of between 0.3 percent and 1 percent. Treasury prices, meanwhile, were falling at the back end of the yield curve while two-year and three-year notes were holding steady at the previous day's price levels.

"There are still concerns over the European banking system," said Mark McCormick, a currency strategist at Brown Brothers Harriman in New York.

"Peripheral CDS are up despite the negative turn in bond yields. I think it's a signal that the European Central Bank is out there buying peripheral debt and supporting the bonds while people are still nervous about those countries."

The 30-year Treasury bond was off nearly a point in price ahead of a 1 p.m. (1700 GMT) auction by the Treasury Department of $16 billion in new 30-year bonds.

The 30-year Treasury bond was last 24/32 lower in price and yielding 3.55 percent, up from 3.52 percent at Wednesday's close.

The benchmark 10-year Treasury note was yielding 2.17 percent, up from 2.12 percent late on Wednesday.

McCormick said most of the money coming out of stocks was going into shorter-dated Treasuries, not 10-year notes and bonds.

"Most of the-people are a little bit skeptical about taking duration risk right now," he said. "A lot of the safe-haven bids are coming into the short end so you could see some steepness here."

Copyright Reuters, 2011