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Yields rise on profit-taking, steadying Wall St

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U.S. Treasuries prices fell on Thursday on profit-taking after the prior day's rally as Wall Street stocks steadied.

Benchmark 10-year Treasury notes, which rose in price by as much as 3 points on Wednesday on fears over the global economy, were off 23/32 in price to yield 2.172 percent in closing New York trade.

Earlier, yields dipped below 2 percent in overseas dealings, but remained above the 17-month lows touched on Wednesday.

"We are seeing a giveback from yesterday," said Tyler Tucci, Treasuries strategist at RBS Securities in Stamford, Connecticut. "It seems that we have reached a level that owning 10s at 2 (percent yields) is no longer interesting, no matter what the market thinks the future of the macroeconomic situation is."

World equities markets pared losses but traded lower on Thursday, with Wall reversing steep early losses and closing on Thursday with modest gains.

Thirty-year Treasuries shot up by more than 5 points on Wednesday before settling back and on Thursday were off after early gains. The 30-year was last off 1-17/32 in price to yield 2.955 percent, compared with a 2.916 percent yield at Wednesday's close.

Volumes in long-dated Treasuries were heavy on Thursday but nowhere near Wednesday's outsized turnover. Shorter-maturity Treasury debt was also off, with the largest price declines among seven-year and five-year issues.

Treasuries prices fell after St. Louis Federal Reserve President James Bullard said the U.S. central bank might want to consider maintaining its bond purchase program to help the economy.

"Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide," Bullard told Bloomberg television. "We have to make sure that inflation and inflation expectations remain near our target."

Earlier, Labor Department officials said initial claims for state unemployment benefits dropped 23,000 to a seasonally adjusted 264,000, its lowest level since 2000.

"The better U.S. data tone and more dovish rhetoric from Fed officials appear to have assuaged the frayed nerves," TD Securities analyst Millan Mulraine told clients.

Jobless claims fell to a 14-year low last week, the Labor Department reported Thursday morning and a Philadelphia Fed survey shows continued manufacturing growth. Home builder confidence is still in the positive range, but fell 5 points to a level of 54 on the National Association of Home Builders/Wells Fargo Housing Market Index.

Correction: An earlier version of this story referred in the headline to a rally in Treasurys as the 10-year yield rises. The yield fell earlier in the day.