U.S. Treasury debt prices rallied on Thursday, pushing yields on long-dated bonds to multi-month lows, in a market that continued to cover short positions ahead of Friday's all-important U.S. nonfarm payrolls data.
Yields on 30-year bonds plunged to near 11-month lows, while those on 10-year notes slid to two-month troughs.
Thursday's U.S. economic reports were in general positive, which should suggest that Treasurys should sell off, not rally.
On Thursday, the Institute for Supply Management said its index of national factory activity rose to 54.9 in April from 53.7 in March. It was the strongest reading since December. However, that was offset by a lower-than-expected rise in U.S. construction spending of 0.2 percent, compared with expectations for a 0.5 percent increase.
"The fact that we have seen stocks pull back and Treasuries rally despite a strong ISM number would suggest that the market is positioned relatively short for the payrolls number tomorrow," said Ian Lyngen, senior government bond strategist, at CRT Capital in Stamford, Connecticut.
Some analysts were perplexed as to why the bond market reacted more to the construction number, which was backward-looking, instead of the ISM report, viewed as first-tier data.
Lyngen surmised the tepid rebound in U.S. construction spending could further revise lower the already dismal U.S. gross domestic product growth figures for the first quarter.