U.S. benchmark Treasurys yields hit two-month highs on Thursday after June U.S. nonfarm payrolls growth beat expectations, while lingering uncertainty about U.S. growth and comments from European Central Bank president Mario Draghi capped the rise in yields.
The Labor Department reported that nonfarm payrolls expanded by 288,000 in June, with the unemployment rate dropped to 6.1 percent, its lowest since September 2008, according to data from the Bureau of Labor Statistics. Both figures were well above Wall Street estimates.
Economists polled by Reuters had forecast a gain of 212,000 jobs in June. It was the first time since the technology boom in the late 1990s that employment has grown above a 200,000 pace for five straight months.
"Employment has bucked the trend of some of the negative data that we saw in the first quarter," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago. "It surely will boost expectations for economic growth."
Analysts said, however, uncertainty as to whether U.S. economic growth will meet stronger expectations after the Federal Reserve concludes its monthly bond-buying program and comments from Draghi limited the rise in yields.
Many expect the Fed to end its massive asset purchases in October. Draghi, on Thursday, said that risks facing the euro zone economy meant interest rates there will stay low for an extended period.
The comments stoked some demand for higher U.S. Treasurys yields compared to German 10-year bund yields, which are currently at 1.3 percent, analysts said.
"U.S. debt is still attracting some demand relative to other sovereign debt given higher U.S. yields," said Dominic Deramo, chief fixed income officer at Wilmington Trust in Wilmington, Delaware.
U.S. Treasurys prices held losses after the Institute for Supply Management said its services index ticked down to 56.0 last month from 56.3 in May, which was a nine-month high. The reading fell shy of economists' forecasts for 56.3, according to a Reuters survey.
Benchmark 10-year Treasury notes were last down 6/32 in price to yield 2.65 percent, from a yield of 2.63 percent late Wednesday. U.S. 30-year Treasury bonds were last down 12/32 in price to yield 3.48 percent, from a yield of 3.47 percent late Wednesday.
The U.S. 10-year yield hit a two-month high of 2.69 percent, while the 30-year yield hit a two-month high of 3.52 percent following the jobs data.
U.S. stocks opened higher, with the Dow breaking above the 17,000 level for the first time, after the U.S. jobs data. The benchmark S&P 500 index was last up 0.36 percent.
The Treasury is scheduled to announce sizes for upcoming three-year, 10-year and 30-year auctions. The latter two are reopenings. Analysts at Barclays expect the Treasury to reduce the three-year size by $1 billion to $27 billion, and maintain the 10-year and 30-year sizes at $21 billion and $13 billion, respectively.
—By Reuters. CNBC contributed to this report.