U.S. government debt prices fell on Thursday, as surprisingly strong data on the housing market raised hopes of the U.S. economy accelerating and spurred investors to favor stocks and growth-oriented assets over low-risk bonds.
News about the Bank of Japan pursuing a program of open-ended asset purchases to help its economy, similar to the one the Federal Reserve has implemented, limited the drop in Treasurys prices.
Benchmark Treasury yields rose for the first time in five sessions after hitting their lowest levels in two weeks on Wednesday on worries about a protracted fight over raising the $16.4 trillion federal debt limit. Earlier this month, they rose near 2 percent, an eight-month high.
"The market is finding it hard to ignore the better economic data and today we had the housing starts numbers,'' said Robert Tipp, chief investment strategist at Prudential Fixed Income in Newark, New Jersey.
The U.S. Commerce Department said home builders broke ground at an annualized rate of 954,000 units in December, which was the fastest monthly pace in four years.
Government data also showed the number of Americans filing new claims for unemployment benefits fell to a five-year low last week, but the Labor Department said the drop stemmed largely from seasonal factors, not dramatic improvement in the jobs market.
Traders brushed off a disappointing report on U.S. Mid-Atlantic business activities from the Philadelphia Federal Reserve.
Still the encouraging housing data were the catalyst for some investors to shift money into stocks from Treasuries in an effort to achieve higher returns, analysts and traders said.
"We are seeing some rotation out of fixed income into equities,'' said Larry Milstein, head of government and agency trading with R.W. Pressprich & Co. in New York.
Benchmark 10-year notes last fell 16/32 in price with their yield rising to 1.881 percent. The 30-year bond dropped 30/32. The 30-year yield rose from late Wednesday to 3.062 percent.
On Wall Street, the Standard & Poor's 500 index was up 0.8 percent on the unexpectedly large rise in housing starts and better-than-expected results from online marketplace eBay.