U.S. Treasurys prices gained on Thursday and benchmark 10-year note yields dropped below 2.50 percent for the first time since last October after a weak manufacturing indicator overcame other data releases that showed solid U.S. economic strength.
The rally was also seen as due to a record number of short positions, where investors bet on yield increases, as these investors have been forced to cover their bearish bets each time bonds rally. U.S. industrial output fell at its fastest rate in more than 1-1/2 years in April as factory production slumped, tempering hopes for a big jump in economic growth after a winter slowdown.
Data earlier on Thursday was more bullish on the economy, showing that fewer Americans filed for unemployment benefits in the last week, consumer prices posted their largest increase in 10 months in April and a gauge of manufacturing in New York state accelerated to its fastest pace in nearly four years.
Bearish bets on five-year and ten-year Treasurys futures have also increased in recent weeks.
Benchmark 10-year Treasury notes were last up 13/32 in price to yield 2.50 percent. Ten-year note yields touched a session low of 2.47 percent earlier, dipping below the psychologically-important level of 2.50 percent for the first time since October.
Thirty-year bonds were last up 23/32 in price to yield 3.34 percent.
Treasurys have rallied even as many investors see yields as likely to rise as the economy gains momentum, with many speculating that the Federal Reserve is likely to begin raising interest rates next year.