NEW YORK: US Treasuries eased on Thursday as traders made room for new supply this week but concern that Greece will struggle to meet the demands of its new bailout package are likely to keep debt yields in a tight range.
Losses were briefly extended after data showing new US claims for unemployment benefits were unchanged last week, holding at the lowest since the early days of the 2007-2009 recession and slightly undermining the safe-haven appeal of US government debt.
Investors continued to ponder whether Greece would be able to meet the requirements of a second bailout, approved by euro zone finance ministers on Tuesday, and avoid a disorderly default that could impact global debt markets.
"Greece has taken a back seat for now, though it is inevitable that it will dominate the market in the very near future," said Gavin Nolan, director of market research at Markit in New York.
The Treasury will sell $29 billion of seven-year notes on Thursday afternoon to round out this week's auctions of $99 billion of new debt.
Auctions of $35 billion of two-year notes on Tuesday and $35 billion of five-year notes on Wednesday were met with solid demand, as Treasuries remained the low-risk investment of choice.
Investors will often move to cheapen Treasuries going into such auctions.
The Federal Reserve has also been selling this week. The central bank on Thursday will sell $8 billion to $8.75 billion of Treasuries expiring April 2014 through February 2015 as part of its latest stimulus program, dubbed "Operation Twist."
Earlier in the week the Fed sold $8.61 billion of Treasuries maturing December 2012 through May 2013.
Benchmark 10-year Treasury notes were trading 5/32 lower in price to yield 2.03 percent, up from 2 percent late Wednesday and not far off the middle of a range of 1.79 percent to 2.17 percent that has held since early November.
"We have been bearish bonds, but we were caught wrong in the short-run not expecting to be stuck in a range that has been relentlessly going nowhere," said George Goncalves, head of US interest rates strategy at Nomura Securities International in New York.
"Bottom-line, US Treasuries were the suboptimal way to express our cautiously optimistic views that things aren't that bad in the economy and that risk markets would rally," he said.
Ahead of Thursday's sale, seven-year notes were trading 2/32 lower in price to yield 1.42 percent, up from 1.4 percent late Wednesday. In the when-issued market, considered a proxy for where the high yield might print at the auction, seven-year notes were trading with a yield near 1.44 percent.
Thirty-year bonds were trading 13/32 lower to yield 3.17 percent from 3.14 percent late Wednesday.
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