UPDATE 1-TREASURIES-Bonds rally as euro slips, stocks fall
* ECB'S Draghi seen less hawkish than expected
* U.S. jobless claims higher than expected, but labor market healing
* Spanish debt sees strong demand as yields below crisis level
NEW YORK, Feb 7 (Reuters) - Prices for U.S. Treasuries rose on Thursday as investors sold riskier assets, including stocks and the euro, following comments from the head of the European Central Bank that were less optimistic than expected. In a news conference, Mario Draghi said the ECB would monitor the recent strength in the euro and the potential effect it could have on prices in the euro zone economy. Draghi also dampened the recent enthusiasm of a return to European growth that has fueled bets on stocks and the euro. "The market's starting to perk up after the ECB press conference, and the allusion to the risk of inflation. We've had this 'risk on' tone since the offset of the year and maybe you're seeing a little bit of risk coming off the table," said Sean Murphy, Treasuries trader at Societe Generale in New York. "There's a little bit of an unwind of the 'risk on' occurring." Draghi, in addition, sounded less optimistic about growth than he did in previous apperances. He said following the ECB's decision to maintain current interest-rate levels that "the economic weakness in the euro area is expected to prevail in the early part of 2013." Given that European economic data had a relatively good run recently, people "were expecting a little more hawkishness than they received from the head of the ECB," said Ian Lyngen, senior government bond strategist at CRT Capital LLC in Stamford, Connecticut. U.S. data pointed to healing in the labor market, with a drop in the number of Americans filing new claims for jobless benefits last week, but the data was secondary to developments abroad, analysts said.
Spain sold more debt than planned and demand was similar to that seen at strong auctions in January, indicating ongoing investor interest in peripheral debt. Despite lower prices for the bonds, yields were still only a fraction of their levels at the height of worries about Spain's economy. The 10-year Treasury note last traded up 5/32 in price to yield 1.945 percent. The 30-year bond last traded up 9/32 in price to yield 3.152 percent, from 3.1703 percent late on Wednesday. "We've had a decent selloff in Treasuries so we're going to bounce around these levels for a time until something comes along to change our views," said Matt Duch, portfolio manager at Calvert Investments in Bethesda, Maryland. U.S. bond prices have stabilized this week after a sharp sell-off. However, options traders in U.S. Treasuries futures and in exchange-traded funds that track the moves in long-dated Treasuries have been betting on lower bond prices and higher yields. Initial claims for state unemployment benefits dropped by 5,000 to a seasonally adjusted 366,000, the Labor Department said. That was higher than anticipated. A separate report showed U.S. nonfarm productivity fell in the fourth quarter by the most in nearly two years as output increased only marginally despite steady gains in employment.