Prices retreat as Wall St advances, oil steadies

US 10-YR
US 30-YR

U.S. Treasury debt prices declined on Thursday as Wall Street rallied and oil prices steadied, on growing confidence European policymakers will launch a bond-buying program to combat slowing economic growth.

Prices of benchmark 10-year Treasurys were off 12/32 and yielding just over 2.01 percent after dipping below that level on Tuesday for the first time since October.

Thirty-year bonds, whose yields on Tuesday approached record lows set in July 2012, last yielded 2.60 percent on Thursday. The long bond, which rose sharply in a government bond rally, was off 1-10/32 in price.

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Shorter maturities had smaller price declines.

Treasury prices dropped in early overseas trading, as stocks in Japan and Europe rose, and the rally continued on Wall Street, where the S&P 500 gained 1.4 percent.

"What's going on in Treasurys has nothing to do with what is going on in the U.S. and everything to do with what is going on in Europe and with what is going on in the energy complex," said Eric Green, head of U.S. rates and economic research at TD Securities in New York.

Steadier oil prices, with Brent crude flat at $51.12 a barrel, encouraged risk appetite among investors spooked by a long slide in oil that suggests struggling global economic growth.

"You've got risk appetite coming back into play," Green said.

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More evidence the European Central Bank may soon start government bond buying, or quantitative easing, came on Thursday from German industrial orders, which fell 2.4 percent in November. That was more than expected. The equity markets have rebounded from recent weakness as a result, sapping some interest in bonds.

Long-dated European yields are much lower than their U.S. rival, with Germany's 10-year currently yielding 0.5 percent and France's 10-year at 0.79 percent. The sharp divergence is in part due to better U.S. growth figures and the expectation that the Fed will raise rates before long, while the ECB still stands add to stimulus.

Lower yields in Europe has contributed to pressure on U.S. yields as investors shift to U.S. government bonds, which pay more for similar risks.

U.S. stocks climbed for a second day after snapping on Wednesday a five-day losing streak. The advance was broad, with 8 of the 10 major S&P sectors gaining at least 1 percent.

Treasurys showed little reaction to U.S. jobless claims. The key jobs report is released Friday.