NEW YORK -- U.S. Treasuries prices were weaker on Thursday and benchmark yields hit a three-week high as data reinforced the view that the Federal Reserve would refrain from cutting official rates in early 2007.
Bonds had been modestly higher early in the session but slipped into negative territory after data showed the number of Americans seeking first-time jobless benefits was lower than expected and November import prices posted a surprise rise.
A strong opening on the stock market also put pressure on bond prices.
The latest data on jobless claims and import prices were "kind of bond bearish," said John Spinello, Treasury bond strategist at Jeffries & Co. in New York.
Benchmark 10-year Treasury notes were 2/32 lower in price to yield 4.59 percent. Bond prices and yields move in opposite directions. Ten-year debt yields reached 4.61 percent, a three-week high, right after the day's job and price data.
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The data also prompted traders to trim their odds of a Fed rate cut in the first quarter of 2007 to about a 16 percent, according to U.S. interest rate futures, down from roughly 20 percent at Wednesday's close.
Americans filing for jobless benefits for the first time fell to 304,000 for week ended Dec. 9 from prior week's 324,000 and well below the expected 320,000.
Import prices rose by 0.2 percent in November versus a 2 percent drop in October and a median forecast for no change.
The drop in claims for jobless benefits, along with Wednesday's surprisingly strong retail sales report, has prompted some to reconsider their view of the U.S. economy, while the higher import prices suggested that inflation pressure has not dissipated, analysts said.
"The U.S. economy is not as weak as some people had thought," said Mark Vitner, senior economist at Wachovia Securities in Charlotte, North Carolina. "The global economy is holding up quite well."
Treasuries are likely to hold in tight range the rest of the session as players move to the sidelines prior to Friday's consumer price index for November, Jeffries' Spinello said.
In the cash trading, two-year notes were down 1/32 in price for a yield 4.73 percent, up 2 basis points from late Wednesday. Two-year note yields briefly hit a two-week high at 4.74 percent.
Five-year U.S. government debt were down 2/32 in price, yielding 4.57 percent, up about 1 basis point from late Wednesday, while the 30-year bond was down 4/32 in price for a yield of 4.71 percent, up about 1 basis point from late Wednesday.
U.S. stocks rose sharply and the Nasdaq climbed more than 1 percent after several companies reported stronger-than-expected profits.
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