A persistent wave of selling briefly pushed benchmark yields back up to 3.00 percent, but yields were not far above the six-month lows set on Wednesday.
A smaller-than-expected decline in weekly jobless claims, following an unexpectedly weak reading on private job growth from ADP Employer Services on Wednesday, failed to stem a sell-off in Treasuries that began in Asia.
Domestic and overseas investors reduced their long-dated bond holdings after the bond market posted its biggest one-day rally in about 2-1/2 months in reaction to disappointing data from ADP and a weaker-than-expected report on manufacturing from the Institute for Supply Management, traders said.
"There were expectations that the claims were going to be a lot worse after the ADP report," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York. "We've had such a big run. People want to take some chips off the table ahead of a big wild card tomorrow."
The government reported on Thursday first-time filings for jobless benefits fell 6,000 to 422,000 last week. Analysts had forecast a total of 415,000.
On Wednesday, ADP reported that US companies added 38,000 jobs in May, far fewer than 175,000 predicted by analysts polled by Reuters.
The surprisingly weak ADP figure caused some Wall Street economists to reduce their forecast on the Labor Department's May payroll reading due 8:30 a.m. (1230 GMT) on Friday.
The median forecast of economists surveyed by Reuters is now for a 150,000 increase, according to a Reuters poll, less than their expectations for a rise of 180,000 before the ADP report.
On the supply front, the Treasury Department will announce details on next week's offerings of new three-year debt and reopened 10-year and 30-year issues at 11 a.m. (1500 GMT).
Most analysts predict the government plans to sell $32 billion in three-year notes and to reopen the 10-year note issued in May by $21 billion and the 30-year bond issued last month by $13 billion.
The price on benchmark 10-year notes last traded down 11/32 with their yield at 2.98 percent, up 4 basis points from late Wednesday.
The 30-year bond was down 30/32, yielding 4.19 percent, up 66 basis points from Wednesday.
Copyright Reuters, 2011