LONDON Jan 17 U.S. bond yields rose on Thursday as investors positioned for further improvements in housing and jobs data later in the day and strong results at a Spanish debt auction hit appetite for triple-A rated government debt.
Weekly jobless claims are expected to drop slightly, while housing starts are seen edging higher, extending a recent series of data that have painted a more upbeat outlook for the United States and have weighed on safe-haven treasuries.
On Wednesday, the Federal Reserve's latest Beige Book showed mild U.S. growth in recent weeks but offered no signal that economic expansion will accelerate.
In the euro zone, debt-laden Spain met the upper end of its target range at a bond auction that saw lower borrowing costs, causing losses for assets generally perceived as low risk.
U.S. benchmark 10-year T-note yields were 2.5 basis points higher at 1.8431 percent, while T-note futures were 9/64 lower at 135-05/32.
"I feel the market is expecting good numbers on the data today and we've had clear signs the U.S. economy is picking up," said Alan McQuaid, chief economist at Merrion Stockbrokers.
"It's obviously slow, but moving in the right direction."
Stopping yields going higher was the debate about raising the $16.4 trillion debt ceiling in the United States, McQuaid said.
The U.S. Treasury said on Tuesday it was temporarily tapping the retirement funds of government workers to avoid hitting the debt ceiling. It has said it can stave off default through such extraordinary measures until around mid-February to early March.
Data from Markit showed the cost to insure against a U.S. default was rising. Five-year credit default swaps rose 2 basis points to 45 basis points on Thursday, having traded just above 30 bps at the start of the year.
That meant it cost 45,000 euros annually to buy 10 million euros of protection against a U.S. default using a five-year CDS contract.
Markit analyst Gavan Nolan said there were very few trades in shorter-dated CDS in Europe.