(Updates with U.S. data, adds comment, updates prices)
NEW YORK, Jan 10 (Reuters) - U.S. government debt prices rose modestly on Thursday ahead of a key speech by Federal Reserve Chairman Ben Bernanke, while an expected weaker start for Wall Street stocks stoked a slight bid for safe-haven Treasuries.
Treasuries fleetingly pared gains after weekly jobless claims data hinted the labor market was not deteriorating as much as expected.
Weak employment and manufacturing figures this year have intensified speculation the U.S. economy is headed toward recession, driving benchmark yields to their lowest since early 2004 earlier this week. Bond yields and prices move inversely.
The benchmark 10-year note's price US10YT=RR traded up 4/32 for a yield of 3.81 percent versus 3.83 percent late on Wednesday.
“A large part of the Treasury market’s action today depends on what the Fed says this afternoon and until then you will not see much movement at all,” said Doug Roberts, chief investment strategist with Channel Capital Research in Shrewsbury, New Jersey.
Bernanke’s speech on financial markets, the economic outlook and monetary policy is scheduled for 1 p.m. (1800 GMT).
“Even though it’s not a formal announcement, it is Bernanke’s first speech of the year and everyone is looking for guidance as to what is going to happen at the upcoming Fed meeting (at the end of this month). For Treasuries and other financial markets (Bernanke’s speech) will assume a much greater magnitude than usual,” Roberts said.
The two-year note, which responds closely to expectations for central bank interest rate moves, traded up 1/32 in price for a yield of 2.70 percent US2YT=RR, versus 2.72 percent late on Wednesday.
“The report was a bit of a negative for bonds, but there will be much more attention on what Bernanke has to say,” said Scott Brown, chief economist with Raymond James & Associates in St Petersburg, Florida.
“There is a slower pace of job growth, but not a lot of job losses out there just yet; that may be a lagging indicator,” Brown said.
After December’s surprisingly weak U.S. payrolls report, investors are closely attuned to the state of the labor market.
Goldman Sachs on Wednesday said the economy will go into recession this year and said it expected the Fed to lower its benchmark short term interest rate to 2.5 percent.
Yet such is the gloom already surrounding the economic outlook -- futures are pricing in a 50 basis point cut from the Fed later this month and 150 basis points in total this year -- that bond investors are trimming back some of their bearish bets.
More supply will flow into the U.S. government bond market with the Treasury due to sell $8 billion of 10-year inflation-protected bonds later on Thursday. (Reporting by John Parry; additional reporting by Jamie McGeever in London; Editing by Chizu Nomiyama,)
Our Standards: The Thomson Reuters Trust Principles.