U.S. Treasury debt prices jumped sharply Thursday, adding to gains on strong demand at a $10 billion auction of 30-year government bonds. The auction was helped by recent sharp declines in energy prices that are alleviating some inflation concerns, analysts said.
The auction's bid-to-cover ratio, an indication of demand, was 2.40, above long term averages.
In the market, the 30-year Treasury bond extended gains, trading up 1-22/32 in price for a yield of 4.59 percent, versus 4.64 percent shortly before the auction and versus 4.70 percent late Wednesday.
"We had back-to-back good auctions in the long end," said Josh Stiles, senior bond strategist at IDEAglobal in New York.
"The relief in oil prices and the deteriorating economic growth outlook is making people less concerned about the longer-term inflation outlook," Stiles said.
"The 10-year (note sale on Wednesday) was a great auction and this 30-year looks good, too," Stiles added.
Treasurys rallied earlier as a stock slide and a jump in new jobless claims revived investors' appetite for safe-haven government bonds.
The jump in the number of people newly jobless last week helped lift bonds because the Federal Reserve is unlikely to raise interest rates when unemployment is rising.
Treasurys investors viewed positively decisions by the Bank of England and the European Central Bank to hold interest rates steady. The ECB said inflation was still its main fear, but said risks to growth were taking hold, causing markets to drop bets that rates would rise again this year.
"Treasurys did quite well after the jobless claims report catapulted prices higher," said John Canavan, analyst at Stone & McCarthy Research Associates in Princeton, N.J. "The market also seemed to respond favorably to the steady hand at the Bank of England and the ECB."
The slide in equities and a "modest oversold correction" in crude oil also aided Treasurys, said John Spinello, Treasury bond strategist at Jefferies & Co in New York.
Benchmark 10-year Treasurys rose 14/32 from Wednesday's close. Their yield, which moves inversely to the price, eased to 4.01 percent from 4.04 percent late Wednesday.
Treasurys briefly shaved gains at mid-morning on a surprise rise in June U.S. pending home sales. The National Association of Realtors said its index of home sales contracts signed in the month unexpectedly rose 5.3 percent to 89.0 from a downwardly revised 84.5 in May, but remained below year-earlier levels.
Joseph LaVorgna, chief U.S. economist at Deutsche Bank Securities, said the pending home sales figures appeared to be positive for housing, but cautioned that the housing market is still "rife with foreclosures and tight credit."