U.S. Treasury debt prices rose on Thursday after disappointing data on jobless claims fueled worries about slowing U.S. economic growth, which would hold down inflation and keep alive the chances of more bond purchases from the Federal Reserve.
Weaker-than-expected economic figures on Europe compounded safe-haven bids for U.S. and German government debt, analysts and traders said.
This risk-averse climate helped spur bidding for $29 billion in new seven-year notes, the last leg of this week's $99 billion in coupon-bearing supply.
"There is decent underlying demand for Treasuries right now. All three auctions were neutral to slightly better (than average)," said Suvrat Prakash, interest rate strategist at BNP Paribas in New York.
The U.S. Treasury Department on Thursday sold new debt securities due in April 2019 at 1.347 percent, the lowest yield at a seven-year auction.
On slightly above-average volume, benchmark 10-year notes last traded up 3/32 in price for a yield of 1.97 percent, down 3 basis points on the day. They were up as much as 16/32 with 1.93 percent yield, helped partly on safety bidding on persistent worries about contagion risk from the euro zone debt crisis.
Yield on Spanish 10-year government debt rose to 5.85 percent, just under the 6 percent level that is seen as unsustainable.
Treasury prices extended gains after the release of the U.S. jobless claims data but subsided later on news that pending home sales in the United States approached a near two-year high in March.
Thirty-year bonds were trading 6/32 higher in price to yield 3.14 percent, down 1 basis point on the day.
A sale of $35 billion of five-year notes on Wednesday met robust demand, with strong interest from foreign central banks and other indirect bidders reflecting the ongoing appeal of safe-haven assets. Tuesday's sale of $35 billion of two-year notes was also met with solid demand.
Meanwhile, the Fed bought $1.833 billion of longer-dated Treasuries on Thursday as part of its latest stimulus program, which has been nicknamed "Operation Twist."
The Labor Department said initial claims for state unemployment benefits dropped by 1,000 in the latest week to a seasonally adjusted 388,000. The prior week's figure was revised up to 389,000 from the previously reported 386,000. Economists polled by Reuters had forecast new claims falling to 375,000 last week.
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