NEW YORK: US Treasury prices were little changed on Thursday, with longer-dated yields dropping to two-week lows, as the possibility of more stimulus from the Bank of Japan offset softer-than-expected readings on traded goods and jobless claims.
The mildly disappointing data supported the notion the US economy is not strong enough for the Federal Reserve to raise interest rates before the end of the year at the earliest; on Wednesday, the Fed left interest rates unchanged.
The outlook for steady US rates rekindled some appetite for US government debt. Demand for the Treasury Department's $28 billion sale of seven-year notes was tepid but still stronger than in two-year and five-year auctions earlier this week.
Bids for bonds abated following a Reuters report that said the BoJ, under pressure from the government, is considering specific measures for more monetary stimulus to help its sluggish economy.
"The Japanese want more stimulus. That could create a more risk-on sentiment and reduce some demand for bonds," said Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey.
It was unclear how the BoJ would step up a stimulus program that already includes negative interest rates and the annual purchase of Japanese government bonds worth 110 trillion to 120 trillion yen (about $1 trillion to $1.1 trillion).
In late US trading, the two-year Treasury yield , which is sensitive to traders' views on Fed policy, was down 1.5 basis points at 0.715 percent. It reached 0.778 percent on Tuesday, the highest since Britain voted to leave the European Union on June 23.
Benchmark 10-year Treasury notes were up 1/32 in price for a yield of 1.506 percent, down 1 basis point from Wednesday, while the 30-year bond was flat, yielding 2.228 percent.
Longer-dated yields fell to two-week lows earlier on Thursday on a wider-than-expected $63.3 billion US trade deficit on goods in June and an unexpectedly rise in new unemployment claims last week.
Thursday's data reinforced the notion of modest US economic growth ahead of the government's initial reading on the gross domestic product for the second quarter.
Still, the Fed in its latest policy statement left the door open for a possible rate increase later this year despite concerns about weak business spending and low inflation.
"We view the risk as one of a path of further removal of policy accommodation" from the Fed, said Bill Northey, chief investment officer for the Private Client Group at US Bank in Helena, Montana.