U.S. Treasury prices climbed on Thursday as losses on Wall Street and data suggesting a slowing in Chinese manufacturing revived safe haven bids for bonds.
Chinese factory figures and an industry report showing weaker factory growth in the United States reduced bets that the Federal Reserve would accelerate its pace of reducing its bond-purchase stimulus. This notion helped to propel benchmark yields to their lowest levels in nearly six weeks.
China's Flash Markit/HSBC PMI fell to 49.6 in January from December's 50.5, showing a faster rate of decrease in new export orders and employment. A reading below 50 signals a contraction in the manufacturing sector of the world's second largest economy.
"We started the day in positive territory on the Chinese data, which was a bit concerning," said Larry Milstein, head of government and agency trading at R.W. Pressprich & Co. in New York.
(Read more: Chinese data's ripple effect on markets)
Bond investors are starting to look ahead to next Wednesday, when the Treasury will hold its inaugural auction of two-year floating-rate notes.
This is the first new type of U.S. government debt security since the introduction of Treasury Inflation-Protected Securities in 1997.
The debut of $15 billion in the two-year floating-rate note issue joins next week's fixed-rate supply of two-year debt ($32 billion), five-year notes ($35 billion) and seven-year debt ($29 billion).
In the meantime, the Treasury will sell $15 billion in 10-year TIPS at 1 p.m.
While the U.S. and Chinese manufacturing data fell short of expectations, a government snapshot of the domestic labor market was mildly encouraging.