(Removes reference to benchmark yields touching 3-week lows)
* U.S. weekly jobless claims unexpectedly fall to 5-year low
* Yields start the day down on worries over U.S. spending
By Chris Reese
NEW YORK, Jan 24 U.S. Treasury debt prices eased
on Thursday, paring early gains after data showing new claims
for unemployment benefits fell unexpectedly to a five-year low
in the latest week.
The fall in jobless claims supported hopes of a recovery in
the labor market and undermined the safe-haven investment appeal
of U.S. government debt. Strength in some stocks also undermined
Treasuries prices, as the S&P 500 rose above 1,500 for the first
time since late 2007.
The jobless claims data "imply that we may get a good
employment number for the month of January when it is released
in early February," said Hugh Johnson, chief investment officer
of Hugh Johnson Advisors LLC in Albany, New York.
Treasuries began the day trading higher in price as
investors sought safe havens due to concerns about the impact of
potential U.S. spending cuts and weak French data.
A Republican plan to extend the U.S. Treasury's borrowing
authority will allow it to borrow money through mid-May,
temporarily easing default concerns. But after the plan's
approval on Wednesday in the House of Representatives, speaker
John Boehner said Republicans would take the next opportunity --
automatic spending cuts set for March 1 -- to demand reforms
from President Barack Obama.
Benchmark 10 year Treasury notes were trading
11/32 lower in price to yield 1.87 percent, up from 1.82 percent
Ahead of the release of the jobless claims data, yields
dipped to 1.81 percent. U.S. yields fell early in the session in
tandem with those of triple-A rated German Bunds after data
showed French business activity shrank in January to the lowest
level since March 2009.
The Federal Reserve bought $3.36 billion of U.S. government
debt maturing February 2020 through November 2022 as part of its
latest economic stimulus program.
The Treasury early on Thursday afternoon will auction $15
billion of 10-year Treasury inflation-protected securities.
The Labor Department said on Thursday that initial claims
for state unemployment benefits fell 5,000 in the latest week to
a seasonally-adjusted 330,000, the lowest level since January
2008. Analysts polled by Reuters had expected claims to rise to
355,000 last week.
Some analysts cautioned, however, that it may be early to
declare the labor market was experiencing anything more than a
very tepid recovery.
"It is welcome to see jobless claims on a downward trend,
but we need a few more weeks to confirm the size of the decline
reflects more than a seasonal swing and the trend is
sustainable," said Mei Li, economic analyst at FTN Financial in
Thirty-year Treasury bonds were trading 25/32
lower in price to yield 3.06 percent, up from 3.01 percent late
(Additional reporting by Chuck Mikolajczak; Editing by Grant
McCool and Kenneth Barry)