Yields tumble on rising jobless claims

CHICAGO: US Treasury yields fell on Thursday as higher-than-expected initial weekly unemployment claims added to worries over the economic recovery from the coronavirus pandemic. The benchmark 10-year yield, which hit a session low of 0.638% after the jobless data was released, was last down 3.4 basis points at 0.6412%.

"The biggest source of the action today is weak jobless claims numbers," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott in Philadelphia.

Initial claims for state unemployment benefits rose to a seasonally adjusted 1.106 million for the week ended Aug. 15, from an upwardly revised 971,000 in the prior week, the Labor Department said on Thursday. Economists polled by Reuters had forecast 925,000.

Yields had climbed on Wednesday after minutes from the Federal Reserve's July meeting indicated that yield curve control would likely provide "only modest benefits in the current environment" and was not coming anytime soon.

The minutes also disclosed concern by central bank policymakers that more easing of monetary policy may be needed to nurse the economy through the pandemic.

Later on Thursday, the US Treasury will sell $7 billion of 30-year Treasury-Inflation Protected Securities (TIPS).

LeBas said the auction is an opportunity to get a better read on where real yields are.

"TIPS volumes in the secondary are not generally too, too high so you might get some indication about the willingness to buy inflation risk on the long end of the curve," he said.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was last at 50.30 basis points, about 3 basis points lower than at Wednesday's close.