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NEW YORK (CNN/Money) -
Bonds turned higher Thursday, shaking off an upbeat unemployment report and higher-than-expected inflation reading, as more Fed officials vowed to squash rising inflation.
The dollar drifted against the yen and fell against the euro.
The benchmark 10-year note added 3/32 of a point to 98-13/32 to yield 4.45 percent, down from 4.46 percent late Wednesday. The 30-year bond gained 9/32 of a point to 110-13/32 to yield 4.67 percent, down from 4.68 percent in the previous session. Bond prices and yields move in opposite directions.
In shorter-dated debt, the five-year note rose 1/32 of a point to yield 4.31 percent, while the two-year note was little changed to yield 4.24 percent.
Longer-dated debt moved to better levels in afternoon trading, while two-year notes lagged, after Atlanta Fed President Jack Guynn said the central bank has many rate hikes to go before it rests.
"There is not some specific numerical point... to policy neutrality," he said, explaining that it was a dynamic concept that was shaped by forces like growth, growth potential and inflation rates, which the U.S. central bank must constantly assess as it makes policy.
Several Fed officials have offered a hawkish view on inflation in recent weeks, a move that would normally weigh on Treasuries since inflation erodes the value of the fixed-interest paying investments.
But officials have tempered remarks that inflation is reaching intolerably high levels with vows to keep money tighter and inflation in check, a move that would take some of the risk out of longer-dated investments.
Earlier in the session, the Labor Department reported 355,000 initial claims for the week ending Oct. 15, down from a revised 390,000 the week before. Economists surveyed by Briefing.com had expected 365,000 people to file for unemployment.
Moreover, the Philadelphia Fed Index showed that factory activity in the Mid-Atlantic recovered in October to 17.3 from a post-Katrina slump at 2.2, well above forecasts for a rise to 10.0.
New orders jumped and the prices paid component of the index, a closely watched inflation measure, spiked to its highest in 25 years. The reading sparked inflation fears and Treasuries briefly retreated on the news.
In currency trading, the dollar drifted against the yen and euro. The dollar bought ¥115.39, up from ¥115.33 late Wednesday, and the euro bought $1.2011, up from $1.1996 in the previous session.
-- from staff and wire reports
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