NEW YORK (MarketWatch) -- Treasury prices turned higher in midmorning trading on Thursday, pushing yields down, as stock benchmark indexes dropped more than 1% and analysts parsed details of the Philadelphia Federal Reserve's manufacturing index, noting weakness in new orders.
Yields on 10-year notes (UST10Y 3.61, -0.03, -0.93%) slid 2 basis points to 3.64%, after touching 3.68% earlier.. A basis point is 0.01 percentage point and yields move inversely to prices.
Yields on two-year notes (UST2YR 0.85, -0.02, -2.30%) declined 1 basis point to 0.87%.
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First-time claims for state unemployment benefits jumped by the largest amount in eight months to a higher-than-predicted 482,000, the Labor Department reported. An official said there were more estimates this week because of the holiday on Monday. In addition, some of the increase may be due to administrative delays in reporting claims since the Christmas and New Year holidays. See more on jobless claims.
"This does not make the claims figures strong, as in economically strong, but just a caution on taking too pessimistic a read," said strategists at CRT Capital Group.
For Obama and Dems, All May Not be Lost
After the debacle in Massachusetts, much of President Obama's domestic agenda is in turmoil. But WSJ's David Wessel says at least one card remains on the table: getting tough with banks.
The index of manufacturing activity in the Philadelphia region diffusion index fell to 15.2 in January from 22.5 in December, the Federal Reserve Bank of Philadelphia said. The decline was sharper than many economists predicted. Read more on Philly Fed.
"The economy continues to show signs of losing its upside momentum," said Steven Ricchiuto, chief economist at Mizuho Securities.
Leading U.S. economic indicators increased 1.1% in December, stronger than the 0.7% increase expected by economists surveyed by MarketWatch. See more on leading indicators.
Also weighing on stocks and benefiting bonds, traders noted President Barack Obama is expected later Thursday to propose new limits on the size of 'too-big-to-fail' banks and the risks they may take. See more on Obama's plan.
U.S. debt remained higher after the Treasury Department said it will sell $44 billion in 2-year notes on Tuesday, followed by $42 billion in five-year debt (UST5YR 2.37, -0.04, -1.45%) the next day. It will also auction $32 billion in seven-year notes on Thursday.
Those amounts are unchanged from last month's sales of the securities and match analysts' expectations.
