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Prices turn down on surprising US jobless claims

U.S. Markets Overview: Treasurys chart

U.S. Treasury debt prices fell on Thursday, with yields on benchmark 10-year notes backing away from two-month lows amid fresh signs America's labor market continues to grow.

In light trading ahead of Friday's frequently market moving U.S. monthly employment report, yields on 10-year Treasurys were up 3 basis points to 1.897 percent.

The 30-year bond, which rallied strongly on Wednesday after the ADP National Employment Report showed private-sector job increases of only 189,000 in March, was yielding 2.509 percent, up 3 basis points.

Shorter maturities were down moderately in price.

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Yields on Treasurys, including a nearly two-month low for the 10-year note of 1.831 percent touched in overseas trading, had been dropping on mushrooming worries about U.S. economic growth and bets the Federal Reserve may push back hikes in interest rates.

The government on Thursday said the number of Americans filing new claims for unemployment benefits unexpectedly fell last week. Initial claims for state unemployment benefits dropped 20,000 to a seasonally adjusted 268,000 for the week ended March 28, the Labor Department said. Economists polled by Reuters had forecast claims rising to 285,000.

Treasurys, which have posted gains for five straight quarters, were up before the jobs claims data were published. Wall Street stocks, which often move in the opposite direction of bonds, were up in early trading.

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"That claims number caught the market off guard because most of the numbers we have been seeing recently have been on the soft side," said Donald Ellenberger, strategist and portfolio manager for Federated Investors in Pittsburgh. "Most people had been expecting a softer jobs number, and this calls that into doubt."

Economists polled by Reuters estimated that U.S. non-farm payrolls rose by 245,000 last month, following a 295,000 gain in February, and the jobless rate to be steady at 5.5 percent.

The state of the U.S. jobs market is seen as central to Fed policymakers, who will determine when to hike Fed interest rates for the first time since 2006.