US Treasury yields pare gains after auction

Bond traders at CME Group
Getty Images

U.S. government debt prices pared losses Thursday following solid demand for an auction of 30-year bonds.

U.S. government debt prices fell ahead of the sale, after the European Central Bank cut key interest rates. Yields, which move inversely to prices, gave up some gains after the sale.

The yield for the benchmark 10-year Treasury note rose higher than 1.94 percent earlier in the day, but lost ground to 1.934 percent. The yield on the 30-year Treasury bond traded as high as 2.727 percent but reversed slightly to 2.696 percent.

The Treasury Department auctioned $12 billion in 30-year bonds at a high yield of 2.72 percent. The bid-to-cover ratio, an indicator of demand, was 2.33, the highest in three months, according to Reuters.

Indirect bidders, which include major central banks, were awarded 60.9 percent, compared to a recent average of 57 percent. Direct bidders, which include domestic money managers, bought 12 percent versus a recent average of 11 percent.

US 10-YR
US 30-YR

Earlier in the day, the ECB cut its deposit rate to -0.4 percent from -0.3 percent, and its refinancing rate to 0 percent from 0.05 percent. The ECB also raised its quantitative easing program to 80 billion euro a month from 60 billion.

The ECB was expected to cut its deposit rate further into negative territory and boost asset purchases in an effort to spark euro zone inflation and encourage growth.

"The ECB has come out of gates drumming big beats and firing on all cylinders. It is Draghi which we have not seen before and today's decision is very like some one coming up with revenge," Naeem Aslam, chief market analyst at AvaTrade, said in a note to clients.

Yields were lower across the board following the ECB's announcement, but 10- year yields and two-year yields erased losses after Mario Draghi said the central bank does not see the need for further rate cuts.

On the U.S. data front, weekly jobless claims came in at 259,000, well below the expected 275,000, and at their lowest level since October.

In oil markets, Brent crude traded at $40.12 a barrel, down 2.3 percent, while U.S. crude settled 1.2 percent lower at $37.84 a barrel.

— CNBC's Patti Domm contributed to this report