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U.S. Treasury debt prices fell Thursday, as data showed the U.S. economy grew at a faster-than-expected pace in the third quarter, raising hopes of an emergence from the worst recession in 70 years.
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A rebound in U.S. stocks also gnawed at the bid for low-risk government debt, while some disappointment over the level of demand in an auction of $31 billion of seven-year notes also took a bite out Treasury debt values.
"The auction was a little disappointing ... with the (gross domestic product) numbers and the rally in stocks, it looks like the market is suffering from some indigestion," said Kim Rupert, managing director of global fixed income analysis at Action Economics in San Francisco.
Benchmark 10-year Treasury notes were trading 23/32 lower in price to yield 3.50 percent, up from 3.42 percent late Wednesday, while the 30-year bond was 1-15/32 lower to yield 4.35 percent, up from 4.26 percent late in the previous session.
The 3.5 percent third-quarter rise in U.S. gross domestic product beat a 3.3 percent increase forecast by economists.
The government's first GDP reading for the quarter surprised some traders, who lowered their outlook in the wake of disappointing data in recent days.
"The market was beginning to price in a weaker outlook, but today's GDP report was good across the entire spectrum," said John Spinello, chief Treasury strategist at Jefferies & Co in New York.
Treasurys briefly extended losses Thursday afternoon in some disappointment that there was not a larger appetite for seven-year notes in the auction.
The sale was part of a record-large weekly offering of $123 billion of Treasury notes, and investors continue to fret over the possibility of waning demand for the massive doses of U.S. government debt.
Seven-year notes were trading 17/32 lower in price to yield 3.09 percent, up from 3.00 percent late Wednesday.
Bonds were also undermined early in the day by the latest figures showing the number of workers filing for unemployment benefits has been falling, although they remain at elevated levels.
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