U.S. Treasurys prices slipped on Thursday, with benchmark yields lingering close to their four-plus month lows, as better-than-expected labor market data and gains in the stock market nicked the safe haven bid in bonds.
The government sold $29 billion in seven-year notes in the third and last auction of the week. There was decent demand for this week's offerings, which totaled $99 billion, despite a reticence from investors to buy these lower-yielding securities, which helped support the market.
Still, bond yields remained locked in a tight trading range, as investors awaited fresh clues on the state of the labor market and the Federal Reserve's assessment on the economy next week.
On Thursday, the government reported that new claims for jobless benefits fell more than expected, offsetting a recent wave of disappointing, albeit bond-friendly, data.
Claims for new jobless benefits fell to 339,000 last week, the U.S. Labor Department said.
"That supports the notion that next Friday's payrolls number should be better than what we saw the month prior and that's the main driver," said Wilmer Stith, portfolio manager of the Wilmington Broad Market Bond Fund, in Baltimore.
Despite Thursday's encouraging jobs data, much of the recent data have depicted slowing economic growth and inflation. This outlook supports bets the Federal Reserve will likely maintain its bond buying program at least until year-end, keeping a reliable large bid in the bond market.
"While today's price erosion was because of a buoyant labor picture, looking ... at the market (as a whole), we still think we're going to be in the lower end of the range for quite some time," Stith said.
Fed policy-makers will meet next Tuesday and Wednesday, and the closely watched monthly payrolls report for April will be released at the end of the week, on May 3.
Benchmark 10-year Treasury notes were down as much as 7/32 in price in reaction to the jobless claims. They last traded 3/32 lower at 102-18/32, with a yield of 1.711 percent, up 8 basis points from Wednesday.
The 10-year yield was about 7 basis points above a more than four-month low of 1.643 percent set on Tuesday.
The economic data helped drive equity markets higher, with the benchmark S&P 500 index up 0.5 percent.
Trading between buyers and sellers has been evenly matched with benchmark yields almost unchanged so far this week, analysts said.
"When things are this balanced, whenever there's any little blip, there's a counter-position that emerges," said Jim Vogel, interest rate strategist at FTN Financial in Memphis, Tennessee.
Longer-dated bond prices were also bogged down by the absence of the Fed, which was not scheduled to buy government debt on Thursday for its bond buying program, known as QE3, which is aimed at supporting the U.S. economy.
The 30-year Treasury bond was 11/32 lower at 104-7/32 to yield 2.912 percent.