US Treasuries fell Thursday after lower-than-expected weekly jobless claims bolstered views of a healthy labor market, lowering expectations of a near-term interest rate cut.
Stock futures rallied early, also weighing on bonds, after Wal-Mart Stores unexpectedly raised its profit outlook.
Investors are mixed on whether the Federal Reserve will cut benchmark interest rates at a policy meeting later this month, and signs that the jobs market is holding up suggested the central bank may not need to ease monetary policy soon.
"Jobs are still growing and that to me is a real important sign that the economy is not on the knife edge of recession," said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. "The Fed is going to take a pass (at its policy meeting) on Oct. 31 and wait for a lot more data when it meets in December."
Benchmark 10-year notes were trading 11/32 lower in price for a yield of 4.70% from 4.66% late Wednesday.