NEW YORK (MarketWatch) --Treasury prices pared gains on Thursday, pushing yields lower, after the Labor Department said claims for unemployment benefits fell more than expected in the latest week and productivity jumped. Two-year note yields (UST2YR 0.89, -0.01, -1.33%) declined 1 basis points to 0.89%, after falling as low as 0.86% in earlier trading. Yields on 10-year notes (UST10Y 3.52, +0.06, +1.62%) rose 1 basis point to 3.54%, after having reached 3.48% before the data. First-time U.S. jobless claims fell 20,000 in the latest week to 512,000. Economists surveyed by MarketWatch expected claims to edge down to 520,000. See more on jobless claims. A separate report showed U.S. companies drove productivity up at a 9.5% annual rate in the third quarter. Unit labor costs - a key measure of inflation - dropped at a 5.2% annual rate in the quarter. See more on productivity. The productivity and labor-cost data "is certainly bullish news for stocks and enhances the Fed's focus on slack and inflation," said bond strategist at CRT Capital Group. "The drop in claims is consistent with a slowing in the pace of labor weakness." Bond prices had been higher before the data as European and Asian investors bought after yields rose Wednesday when the Federal Reserve repeated it would keep interest rates low for an extended period. Still, trading may be confined to a tight range before Friday's more closely watched monthly read on the labor market. The government is expected to say payrolls fell by 150,000 in October, less than the 263,000 drop in September, according to economists surveyed by MarketWatch. The unemployment rate is forecast to increase to 9.9% last month from 9.8%.

Source