(Updates with market activity, analyst comment) By Ross Kerber BOSTON, Dec 19 (Reuters) - U.S. Treasury yields fell on Thursday as traders weighed mixed economic signals on recent domestic labor market and business conditions. The benchmark 10-year yield was down 1.9 basis points at 1.9047% in afternoon trading, after rising as high as 1.9520%. Yields fell back after the U.S. Labor Department said the number of Americans filing applications for unemployment benefits dropped from more than a two-year high last week. While the report pointed to sustained labor market strength, initial claims for state unemployment benefits were higher than economists had forecast. The figures drew traders' attention away from more positive long-term trends, said James Barnes, director of fixed income at Bryn Mawr Trust. "The recent attention on trade and global central policy shifted a little this morning" based on the jobs report, he said. Investors remained positive overall with stock indexes hitting new highs after U.S. Treasury Secretary Steven Mnuchin said an initial U.S.-China trade deal would be signed in early January. In a separate report on Thursday, the Philadelphia Federal Reserve said its business conditions index dropped to a reading of 0.3 in December from 10.4 in November. But there were increases in measures of new orders, unfilled orders, factory hours and shipments. In addition, U.S. home sales dropped more than expected in November due to an ongoing shortage of properties for sale, despite the sector receiving an overall boost from the Federal Reserve's decision to cut interest rates this year, according to a report from the National Association of Realtors. In a Wall Street Journal interview published on Thursday James Bullard, president of the Federal Reserve Bank of St. Louis, said he sees no reason now to change rates in 2020. Bullard's comments drove down the two-year yield, which typically moves in step with interest rate expectations. It fell 1.6 basis points to 1.6166% in afternoon trading. The U.S. yield curve, measured as the difference between the yields on two- and 10-year Treasury notes, was at 28.6 basis points in midday trading, just above Wednesday's close of 28.4. At one point, it reached as high as 31 basis points, its widest since October 2018. Mary Ann Hurley, vice president at D.A. Davidson, said Bullard's comments were in line with those of other Fed officials recently, and offset data that largely consisted of lagging indicators. Light volumes on the day could have magnified the market impact of trades, she said. Hurley said the Fed could find it easier to lower rates than raise them in its future decision-making. "With all the excess capacity worldwide I can't see inflationary pressures" arising quickly, she said. December 19 Thursday 2:00PM New York / 1900 GMT Price Current Net Yield % Change (bps) Three-month bills 1.5325 1.564 0.005 Six-month bills 1.5325 1.5701 -0.005 Two-year note 99-199/256 1.6166 -0.016 Three-year note 99-242/256 1.6438 -0.027 Five-year note 98-250/256 1.7167 -0.021 Seven-year note 98-160/256 1.8367 -0.019 10-year note 98-156/256 1.9047 -0.019 30-year bond 100-176/256 2.3428 -0.008 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 7.00 0.25 spread U.S. 3-year dollar swap 2.75 0.75 spread U.S. 5-year dollar swap -1.00 0.00 spread U.S. 10-year dollar swap -5.25 0.00 spread U.S. 30-year dollar swap -30.25 -0.25 spread (Editing by David Gregorio and Bill Berkrot)
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