* Surveys show downturn in euro zone businesses
* Philly Fed business conditions in Jan. lowest in 8 months
* U.S. weekly jobless claims rise by more than expected
* 30-year TIPS supply fetches higher-than-expected yield
By Chris Reese
NEW YORK, Feb 21 U.S. Treasuries rose on
Thursday as worries over a lack of economic recovery in Europe,
along with a struggling labor market and tepid business
conditions in the United States, prompted investors to buy
assets perceived as safe havens.
Treasuries were bolstered early in the day as prospects that
the debt-laden euro zone might soon emerge from recession were
shaken, with surveys showing business indicators unexpectedly
worsened this month, especially in France.
Prices extended gains after data showing the number of
Americans filing new claims for unemployment benefits rose by
more than expected last week. Prices were also bolstered after
the Federal Reserve Bank of Philadelphia's index of business
conditions was shown to have fallen in February to the lowest
since June 2012.
"This data suggests the economy might not be as strong as
people are expecting," said Adam Sarhan, chief executive of
Sarhan Capital in New York.
Benchmark 10-year Treasury notes were trading
12/32 higher in price to yield 1.97 percent, down from 2.01
percent late Wednesday but still well within the 1.93 percent to
2.06 percent range that has held sway for over three weeks.
The 30-year bond last traded 29/32 higher for a
yield 3.153 percent, down 4.8 basis points from Wednesday.
"The job market is gradually improving but not fast enough
for the Fed to remove accommodation. We still think a Fed rate
hike is a late 2014 to early 2015 event. They might taper off
bond purchases in the fourth quarter," said Jacob Oubina, senior
economist at RBC Capital Markets in New York.
U.S. bonds weakened briefly on Wednesday as the latest
minutes from the Federal Open Market Committee showed
policymakers discussed slowing or stopping Federal Reserve bond
purchases aimed at reducing unemployment.
They later rebounded as a sharp fall in stock prices
rekindled some safe-haven bids for bonds.
The Fed on Thursday was buying $3 billion to $3.75 billion
of Treasuries maturing November 2018 through February 2020 as
part of its latest economic stimulus program. The central bank
is purchasing $45 billion per month of Treasuries and $40
billion per month of mortgage-backed securities in an effort to
reduce unemployment and spur economic recovery.
Treasuries prices remain underpinned by concerns over the
potential economic impact of $85 billion of automatic government
spending cuts set to kick in March 1. Few analysts expect
Republicans and Democrats to reach any sort of budget agreement
to avoid the cuts before the deadline.
Outside of the Philadelphia Fed and weekly jobless claims
data, the government said consumer prices were flat in January
while U.S. home resales edged higher last month.
Given this view of sluggish growth and inflation, the
bidding for $9 billion of new 30-year Treasury Inflation
Protected Securities was modest.
The bid-to-cover ratio, a gauge of overall demand, was 2.47,
which was the lowest in three 30-year TIPS auctions.
The yield on the new 30-year TIPS issue came in at 0.639
percent, more than 2 basis points than what traders had
expected, while large investors and foreign central banks bought
more than three-quarters of the supply.