TREASURIES-U.S. bonds rally as concerns ease over rising rates
* Thirty-year supply set to sell at highest yield since 2011
* U.S. jobless claims unexpectedly rise in latest week
* Fed to buy $1.0 billion to $1.5 billion in TIPS
NEW YORK, July 11 (Reuters) - The U.S. government debt market rallied on Thursday as investors perceived remarks by Federal Reserve Chairman Ben Bernanke as suggesting the U.S. central bank would hold interest rates near zero for an extended period even after it stops buying bonds. Revived bids for Treasuries should spur demand at a $13 billion auction of 30-year bonds, the final part of this week's $66 billion in coupon-bearing supply, analysts said. "If the Fed is not going to change (rate) policy any time soon, you are going to see guys happy to buy at this level," said Todd Colvin, senior vice president of global institutional sales at R.J. O'Brien and Associates in Chicago. Another factor behind the bids for Treasuries was an unexpected rise in U.S. jobless claims in the latest week, casting some doubts about the recent acceleration in job growth - which is seen critical in the Fed's decision whether to scale back its bond purchases, currently at $85 billion a month.
Bernanke, at a conference Wednesday sponsored by the National Bureau of Economic Research, said a "highly accommodative policy is needed for the foreseeable future."
Also on Wednesday, the Fed released the minutes of its June 18-19 policy meeting, which showed about half of the policymakers felt the central bank's bond-buying program should be over by year-end, but many wanted reassurance the U.S. jobs recovery was on solid ground before any policy retreat.
After that meeting of policymakers, Bernanke laid out a roadmap on a possible reduction of the Fed's third round of quantitative easing, dubbed QE3, which many on Wall Street anticipate might occur in September. As part of its ongoing bond-buying program, the Fed on Thursday planned to purchase $1.0 billion to $1.5 billion in Treasury Inflation-Protected Securities at 11:00 a.m. EDT (1500 GMT). Since the Fed first signaled its intention for a possible pullback in stimulus, financial markets have been roiled, with bond yields here and abroad surging. On Monday, benchmark Treasury yields touched their highest levels in nearly two years. In recent days, Bernanke and other top Fed officials have sought to soothe the concerns of market participants by trying to differentiate between reducing stimulus or buying fewer Treasuries and mortgage-backed securities, and tightening policy or raising short-term interest rates. It is unclear whether they have achieved the goal of calming investors, but bond yields retreated from their recent peaks. "We tend to be rangebound in rates at this point in the next month or two," said David Lafferty, chief investment strategist at Natixis Global Asset Management in Boston, which oversees about $785 billion. On above-average volume, benchmark 10-year Treasury notes last traded 24/32 higher in price with a yield of 2.583 percent, down 8.9 basis points from late on Wednesday. The 10-year yield touched a session low of 2.553 percent, which was 20 basis points below the 23-month high set on Monday in the wake of a surprisingly strong June payrolls report. Despite the market rebound, the 30-year bond auction was still on track to fetch its highest yield since August 2011. In the "when-issued" sector, traders expected the reopening of the 30-year bond issue due in May 2043 to sell at a yield of 3.641 percent. Mortgage-backed securities also posted gains after Bernanke's remarks. Prices on 3.5-percent coupon MBS supported 13/32, yielding 3.368 percent, down 10.6 basis points from late on Wednesday.