US Treasury yields rise on strong economic growth

U.S. Treasurys

U.S. Treasurys yields rose to three-month highs on Thursday after numbers on strong U.S. growth and decreasing claims for unemployment benefits added to expectations the Federal Reserve is more likely to pare bond purchases in the coming months.

The U.S. economy grew faster than initially estimated in the third quarter as businesses aggressively accumulated stock, but underlying domestic demand remained sluggish. Gross domestic product grew at a 3.6 percent annual rate instead of the 2.8 percent pace reported earlier, the Commerce Department said on Thursday.

The number of Americans filing new claims for unemployment benefits also unexpectedly fell last week, a hopeful sign for the labor market recovery.

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"There was a significant drop in claims and a better than expected GDP number," said Sean Murphy, a Treasurys trader at Societe Generale in New York.

Benchmark 10-year Treasurys fell 9/32 in price to yield 2.873 percent, breaking above technical support at 2.85 percent. Thirty-year bonds fell 8/32 in price to yield 3.916 percent.

Thursday's data comes before Friday's highly anticipated jobs report, which is expected to show that employers added 180,000 jobs in November, according to the median estimate of 90 economists polled by Reuters.

Some traders are speculating that the number could come in even stronger, with a gain of more than 200,000 jobs, and that the data could be enough for the Federal Reserve to announce a pullback in its $85 billion-a-month bond purchase program sooner.

Many think the central bank is most likely to begin paring purchases in March, but an increasing number are betting on January as the data improves, with some even seeing an announcement at the Fed's December meeting next week as a possibility.

"There are still people interpreting that the door is still open for a December taper next week out of the FOMC," said Murphy.

The Fed will buy between $1.25 billion and $1.75 billion in bonds due 2036 and 2043 on Thursday as part of its ongoing purchase program.

—By Reuters