U.S. Treasuries rose Thursday as the market digested a government debt auction with ease and investors found more reasons to seek safe-haven investments in bonds.
Month-end pressures also inspired buying, producing solid price gains. Meanwhile traders prepared for a highly anticipated speech by Federal Reserve Chairman Ben Bernanke on Friday.
The Fed chief is scheduled to speak on housing, the original source of the credit market ructions that have sent stocks reeling and government bonds rallying in recent weeks as firms found it increasingly difficult to secure financing.
"Everyone is waiting to see what Bernanke's tone is tomorrow," said Rick Klingman, managing director of U.S. Treasury trading at BNP Paribas in New York.
It was unclear whether the speech would signal a greater willingness to cut rates in an effort to shore up the economy. Normally this might be bond-positive, but debt could sell off if such an outcome inspired a strong equities rally.
But Treasuries found plenty of other reasons to gain, including a brief rally on news dangerous chemicals had been found at United Nations headquarters in New York, as well as the second of two strong government debt auctions this week.
"We've had two decent, solid auctions this week, so there is some overall interest in our market," said Klingman. "There is still a buy-dip mentality...just because people think the economic numbers are going to deteriorate down the road and you're going to see a lower funds rate."
The benchmark 10-year note gained 13/32 in price, yielding 4.51 percent. Five-year notes surged 10/32 in price to yield 4.23 percent.
The government's $13 billion auction of five-year notes attracted above-average demand, adding fuel to the rally in those maturities.
"Given the ongoing bid and general nervousness into month-end, we see little reason to fade it at this point," said Ian Lyngen, interest rate strategist at RBS Greenwich Capital in Greenwich, Connecticut, in a note to clients.
Adam Brown, co-head of U.S. Treasury trading at Barclays Capital in New York, said "there was a pretty big short-term move" when the UN news hit the market.
The United Nations discovered vials of dangerous chemicals from inspections in Iraq. There was no evacuation. "We are seeing some accelerated month-end buying," Brown added.