Prices rise as higher yields lure buyers

NEW YORK: US Treasuries prices gained o n T hursday after a three-day rise in yields attracted buyers and data showing a rise in new claims for unemployment benefits last week indicated a drag on the recovery.

Yields have jumped this week on stronger economic data and as investors have greater hope that Spain will get support from Europe's bailout fund, boosting risk-taking and reducing demand for safe-haven debt.

"We're retracing a little bit of the drastic move we've seen," said Rick Klingman, a Treasuries trader at BNP Paribas in New York. "We are seeing a little bit of better real money buying at these levels, and we've hit yield targets that some people had."

Benchmark 10-year notes rose 2/32 in price to yield 1.82 percent, not far off the 200-day moving average. The yield has risen from 1.66 percent on Friday.

Thirty-year bonds rose 8/32 in price to yield 2.99 percent, after closing at 3.00 percent on Wednesday.

There was heavy selling of Treasuries on Wednesday as investors adjusted for the improving economic data and the apparently more stable European situation, which has boosted riskier assets like stocks and hurt bonds.

This shift is likely to keep yields more elevated than in previous weeks, said Sean Murphy, a Treasuries trader at Societe Generale in New York. "The 'risk on' trade is strengthening," he said.

Prices temporarily extended gains after Thursday's report showing US jobless claims rose in the latest week, though the data still pointed to a slowly healing labor market.

"It was a little bit higher than expected," said Murphy.

Speculation that the Federal Reserve may modify language in its guidance over how long it will hold rates down also caused some volatility in intermediate-dated debt, traders said.

The US central bank has said it will hold rates near zero until at least mid-2015. But some investors are speculating that due to the improving data, the timeline could be shortened when the Fed meets next week.

An auction of $7 billion of reopened 30-year Treasury inflation-protected securities o n T hursday was met with average demand, and Treasuries traded steady at higher levels following the sale.