* Higher-than-expected initial jobless claims boost bonds
* Inflation looks tame with CPI as expected
* 'Successful' Spanish auction boosts euro, stocks
By Emily Flitter
NEW YORK, June 17 U.S. Treasury prices gained
slightly on Thursday after jobless claims unexpectedly rose for
the week, while inflation data came in as forecast, showing a
drop in prices for consumers.
Bond investors watch inflation data carefully for signs
that prices--and therefore interest rates--could begin to rise,
thus devaluing their bond holdings. But Thursday's data showed
no inflation, while the jump in initial jobless claims heralded
more choppiness in the economic recovery--another positive for
"The data are pretty bond-friendly overall," said Jim
DeMasi, chief fixed income strategist at Stifel Nicolaus in
Baltimore. "With the rise in jobless claims, it is consistent
with the view that the recovery is going to fairly moderate. We
are not going to get the kind of job growth and therefore GDP
growth, which is going to generate inflation."
Higher stock index futures contained Treasuries' price
increases, as the government bond market dutifully adhered to
its inverse correlation with the stock market for another day,
while yields stayed wedged into a tight range.
U.S. stocks looked set to open higher following a global
rally in equities and a rebound in the euro spurred in part by
Spain's auction of 10-year and 30-year bonds, which market
participants considered to be a success even though its
bid-to-cover ratio was weaker and yields on both maturities
rose significantly. For more, click on [ID:nLDE65G1HJ]
Treasury traders said bonds could slide back into losses if
stock market gains looked as though they could stick at least
until the end of the day.
"It's more of a day-trading environment right now with a
range of six to eight basis points in the 10-year note," said
John Spinello, Treasury bond strategist at Jefferies & Co. in
"The information we have right now will probably keep us
Jobless claims for the week registered at 472,000, up from
a revised 460,000 last week and higher than analysts'
expectations. Analysts polled by ThomsonReuters expected
jobless claims to fall to 450,000 this week. [ID:nLLAHHE619]
Consumer prices, meanwhile, fell 0.2 percent in May, the
largest decline since December 2008. The drop matched analysts'
Benchmark 10-year Treasury notes US10YT=RR traded 3/32
higher in price to yield 3.26 percent, down from 3.27 percent
late on Wednesday.
Two-year Treasury notes US2YT=RR were unchanged in price
to yield 0.73 percent, down from 0.74 late on Wednesday, while
the 30-year Treasury bond US30YT=RR was off 2/32 to yield
4.19 percent, up from from 4.18 percent.
(Additional reporting by Richard Leong)
(Editing by Theodore d'Afflisio)