Bonds fall as jobless claims soften
Investors bank on strengthening job market and future economic recovery after Labor Department reports fewer unemployment claims.
NEW YORK (CNNMoney.com) -- Treasury prices fell Thursday after a government report showed an unexpected decline in new jobless claims.
The benchmark 10-year U.S. treasury bond fell 8/32 to 101 13/32, while it yielded 3.82% for investors, down from 3.79% late Wednesday. Bond prices and yields move in opposite directions.
The 30-year long bond traded down 12/32 at 100 17/32, and its yield rose to 4.46% from 4.44%.
Meanwhile the 2-year note fell 4/32 to 100 26/32 and yielded 2.3%.
Job market hope: The number of newly unemployed workers in the U.S. fell by 13,000 to 432,000 last week, according to a report from the Labor Department.
Though it was the fifth straight week with claims levels above 400,000 - a benchmark rate that indicates job market weakness - economists polled by Briefing.com had expected the number of claims to fall to 438,000.
Many investors saw the fall in jobless claims as a sign that the U.S. economy could recover, despite weakness in the U.S. financial sector on Thursday.
Investors had already been aware of a possible resurgence in the job market.
The government had already stated that jobless claims may have been inflated due to a planned extension in the amount of time unemployed workers have to file claims.
"We've been saying that it's very important that claims trend lower because that distortion is coming out of the market," said Aaron Smith, senior economist with Moody's Economy.com.
Investors also mulled the idea that the economy could add as many as 900,000 jobs in 2009, and another 2.6 million in 2010, as the economy recovers from its recent slump, according to a report released Wednesday by the University of Michigan.
Investors often buy government-backed bonds during times of economic weakness, and then pull their money out as more lucrative investments become safer.
Financial stocks: Bonds also lost ground as the share prices of mortgage finance companies Freddie Mac (FRE, Fortune 500) and Fannie Mae (FNM, Fortune 500) recovered later in the day. Investors sold treasurys on reports indicating the government may need to step in to keep them from going bust.
If the government steps in to rescue the finance companies, the amount of capital required could cause the government to flood the market with bonds to pay for it, according to Smith.
Bond losses were tempered, despite the positive job market outlook, as financial stocks, led by loss forecasts for Lehman Brothers Holdings, Inc. (LEH, Fortune 500), helped drive down the Dow Jones Index. 
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