* News of downed fighter jet drives Treasuries buying
* Traders shrug off surprise drop in jobless claims
* Ukraine crisis threatens euro zone economy, Draghi says
(Adds late prices, details on fighter downing)
By Michael Connor
NEW YORK, Aug 7 U.S. Treasuries prices rose on
Thursday, knocking benchmark 10-year yields to lows last seen in
May, as news that a Ukrainian fighter jet had been downed
rattled investors already worried over a Russian ban of Western
Ten-year notes, whose yields topped 2.50 percent
on Tuesday, were up 13/32 in price to yield 2.427 percent, which
was the lowest payout on the issue since May 29.
A big jump in Treasury prices, which also took 5-year yields
to a four-week low, came after a report that a Ukrainian Mig-29
fighter was downed by rebel forces in Ukraine.
"Even before the intentional tragedy of (Malaysian airliner)
MH17, the fighter conflict over the eastern border was worrying
the market. Now you have a preview of Russian forces possibly
moving across the border," said Jim Vogel, interest rate
strategist at FTN Financial in Memphis.
Thirty-year Treasury bonds also jumped and were
up 25/32 in price to yield 3.236 percent. The long bond had
yielded as little as 3.234 percent.
Shortly after the New York open, Treasuries pared overseas
gains as data showed the number of Americans filing new claims
for unemployment benefits unexpectedly fell last week.
But Treasuries rose again as European Central Bank President
Mario Draghi told reporters in Frankfurt that the Ukraine crisis
threatened the euro zone economy.
"Draghi seems to be striking a cautionary note," said Guy
LeBas, chief fixed income strategist at Janney Montgomery Scott
"The thing to look at is the relative value between U.S. and
European rates," LeBas said. "With the German 10-year (yielding)
below 1.1 percent, it is easy see why many investors would be
interested in the U.S. market."
Ten-year Bund yields dropped 3 basis points to
a record low 1.07 percent amid fears the Ukrainian crisis and
tit-for-tat sanctions with Russia may threaten Europe's fragile
Russia said on Wednesday it would ban all food imports from
the United States and all fruit and vegetables from Europe in
response to Western sanctions on Moscow.
"The real issue is how the sanctions are going to influence
economic activity," LeBas said. "One estimate puts the cost of
Russia's refusal to import foreign food at as much as 2 percent.
That would have a big negative economic impact."
(Reporting by Michael Connor in New York; Editing by Bernadette
Baum, Dan Grebler and Jeffrey)