Prices for U.S. Treasurys rose on Thursday as investors bought safe-haven U.S. debt after the head of the European Central Bank noted the risks facing the euro zone economy, cooling investors' fervor for riskier assets.
Treasurys rose as stocks and the euro fell after European Central Bank chief Mario Draghi said risks to the euro zone economy were to the downside and that economic weakness in the euro zone will likely prevail in coming months.
"We've had this 'risk on' tone since the offset of the year and ... a little bit of risk (is) coming off the table," said Sean Murphy, Treasurys trader at Societe Generale in New York.
"Europe is keeping a lid on yields," said James Camp, managing director of fixed income at St. Petersburg, Florida-based Eagle Asset Management. (Read More: Watch What Central Bankers Says, Not What They Do)
U.S. data pointed to healing in the labor market, with a drop in the number of Americans filing new claims for jobless benefits last week, but the report was overshadowed by developments abroad, analysts said.
The more cautious approach to riskier assets did not seem to hurt demand in an auction of Spanish sovereign debt. Spain sold more debt than planned. The strong demand indicated ongoing investor interest in peripheral debt.
Benchmark 10-year notes last traded up 3/32 in price to yield 1.953 percent.
The 30-year bond last traded up 2/32 in price to yield 3.164 percent, from 3.16 percent late on Wednesday.
"We've had a decent selloff in Treasurys so we're going to bounce around these levels for a time until something comes along to change our views," said Matt Duch, portfolio manager at Calvert Investments in Bethesda, Maryland.
U.S. bond prices have stabilized this week after a sharp selloff.
Options traders in U.S. Treasurys futures and in exchange-traded funds that track the moves in long-dated Treasurys have been betting on lower bond prices and higher yields.
Most analysts expect any upward trend in yields to be very gradual.
Initial claims for state unemployment benefits dropped by 5,000 to a seasonally adjusted 366,000, the Labor Department said. Economists polled by Reuters had expected 360,000 claims.
A separate report showed U.S. nonfarm productivity fell in the fourth quarter by the most in nearly two years as output increased only marginally despite steady gains in employment.