Prices for U.S. Treasurys gained on Thursday as lukewarm data pointed to a long slog of a recovery in the world's biggest economy, fueling bids for safe-haven investments.
The number of Americans filing new claims for unemployment benefits rose last week and factory activity in the nation's Mid-Atlantic region cooled in April, further signs of a moderation in economic growth.
"Over the last month to month and a half, the bond market has anticipated that we are entering a soft patch, and today's economic statistics were mostly soft and supported that view," said Dan Heckman, senior fixed-income strategist at U.S. Bank Wealth Management in Minneapolis.
"We're now just on the edge of seeing some of the negative impact from the sequestration (federal budget cuts) and we'll see more of that potential impact this month," he said. "We don't think sequestration creates a huge headwind, but it nonetheless is a headwind."
The benchmark 10-year Treasury note was trading 3/32 higher in price to yield 1.688 percent, just above Wednesday's intraday low of 1.673 percent, the lowest in over four months.
Ten-year notes "are still bouncing around 1.69 (percent), 1.70 (percent), which is a resistance level," said Matt Duch, a portfolio manager at Calvert Investments in Bethesda, Maryland.
Though investors have some "sticker shock" at holding Treasurys for long at these prices, he said, yields could move even lower if 10-years continue to close below 1.70 percent.
Thirty-year bonds rose 8/32 to yield 2.865 percent, compared with 2.88 percent late on Wednesday.
Prices also found support from the Federal Reserve's purchase of $3.38 billion of Treasurys maturing between May 2020 and February 2023 as part of its quantitative easing monetary stimulus program aimed at fostering economic growth and cutting unemployment.
The Treasury auctioned $18 billion of 5-year Treasury Inflation-Protected Securities (TIPS) on Thursday at a high yield of negative 1.311 percent, as well, an original issue auction scheduled to be reopened in August and again in December.
But the auction overall was weak, analysts said, with investors reluctant.
"That was a very rich part of the TIPS curve. It never cheapened," said Chris McReynolds, head of U.S. Treasury trading at Barclays in New York.
Between soft economic data and a recent selloff in commodities, he said, "it's definitely made people less worried about inflation."