TREASURIES-Bonds rise on Europe, U.S. job worries
* Weekly U.S. jobless claims fall less than expected * Pending U.S. home sales approach two-year high * Growing euro zone gloom, credit jitters lift bond prices * Latest U.S. 7-year note supply sets record auction low By Richard Leong NEW YORK, April 26 (Reuters) - 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 European economic figures stoked fears that region is entering a recession and compounded safe-haven bids for U.S. government debt, analysts and traders said. "We've seen a deterioration in data in the U.S. and Europe. That's keeping a bid for Treasuries," said Jason Brady, portfolio manager at Thornburg Investment Management in Santa Fe, New Mexico, which oversees $82 billion in assets. The U.S. government said initial claims for jobless benefits dropped by only 1,000 in the latest week to 388,000, which was far fewer than forecast. On the other hand, the National Association of Realtors said pending home sales rose 4.1 percent to a near two-year high. In Europe, Italian business sentiment fell to its lowest level in 2-1/2 years, while an index on broader euro zone economic sentiment fell more than expected in April. 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. 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. There was no clear consensus on the future path of U.S. monetary policy, a day after the Federal Reserve affirmed its commitment to near zero interest rates and hinted at no imminent move to embark on a third bout of large-scale bond purchase, dubbed QE3, to stimulate U.S. economic growth with unemployment stuck at a historic high. The Federal Open Market Committee, the Fed's policy-setting group, moderately upgraded its outlook on the U.S. economy for a second straight meeting. That was offset by Chairman Ben Bernanke's press conference on Wednesday, where he signaled the Fed is prepared to inject more stimulus if U.S. economic growth slows much further. On Friday, the government will release its first reading on U.S. gross domestic product, which analysts predicted likely grew at an annualized rate of 2.5 percent, slower than the 3.0 percent annualized rate in the last quarter of 2011. "Some investors are choosing to focus on the hawkish aspects of the latest Fed forecasts, while others are listening more to Bernanke's comments," said Suvrat Prakash, an interest rate strategist with BNP Paribas in New York. On slightly above-average volume, benchmark 10-year notes last traded up 11/32 in price for a yield of 1.95 percent, down 4 basis points on the day. They were up as much as 16/32 with a 1.93 percent yield, helped partly on safety bidding on persistent worries about contagion risk from the euro zone debt crisis. The borrowing costs for Italy and Spain, the euro zone's third and fourth biggest economies, were hovering at worrisome levels that are seen unsustainable given their heavy debt load. Yield on Spanish 10-year government debt ended flat at 5.84 percent, while the yield on 10-year Italian sovereign bonds was little changed at 5.639 percent. Treasury prices extended gains after the release of the U.S. jobless claims data but subsided later on better-than-expected news on U.S. pending home sales. A third straight day of gains on Wall Street stocks also put a lid on the rise in Treasuries prices. Thirty-year bonds were trading 18/32 higher in price to yield 3.12 percent, down 3 basis points on the day.
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