Bonds

Treasury yields fall after Fed's Williams says it's important to act fast when economy slows

U.S. government debt yields fell on Thursday after New York Federal Reserve President John Williams said the central bank should "act quickly" when the economy slows.

Rather than keep the overnight lending rate high to afford central banks room to cut during a future crisis, Williams advocated for more preemptive measures.

"It's better to take preventative measures than to wait for disaster to unfold, " he said in a speech. "When you only have so much stimulus at your disposal, it pays to act quickly to lower rates at the first sign of economic distress." After Williams's comments, traders increased their bets that the Fed would move to cut borrowing costs at its meeting at the end of July.

Markets believe the Fed is more likely than not to cut rates when it convenes on July 30-31. The central bank's current target range is between 2.25% and 2.5%, above zero but well below levels considered normal during prior economic expansions.

Treasurys

At around 2:43 p.m. ET, the yield on the benchmark 10-year Treasury note, which moves inversely to price, held steady around 2.06%, while the yield on the 30-year Treasury bond was just higher at 2.572%.

The Wall Street Journal reported that trade negotiations with China are at an impasse. This is reportedly due to differences over restrictions on Huawei. On Tuesday, U.S. President Donald Trump said there's still a long way to go before a deal with China can be reached.

The number of Americans applying for unemployment benefits increased last week, suggesting strength in the labor market notwithstanding hints of an economic slowdown.

Claims for state unemployment benefits rose 8,000 to a seasonally adjusted 216,000 for the week ended July 13, the Labor Department said on Thursday. Meanwhile, data for the prior week was adjusted to show 1,000 fewer applications received than previously reported.

— CNBC's Jeff Cox and Silvia Amaro contributed reporting.