* 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 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
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.