Treasurys Pull Back After Jobs Data, TIPS Auction

• Key Interest Rates
• Bond Market Update

By John Spence & Wallace Witkowski, MarketWatch

Last Update: 4:31 PM ET Sep 2, 2010

BOSTON (MarketWatch) -- Treasury prices edged lower Thursday following the auction of $10 billion in ten-year Treasury Inflation-Protected Securities, or TIPS, and a slight decline in weekly jobless-claims data.

With the exception of the 2-year note (UST2YR) , Treasurys prices dipped slightly from earlier in the day after the auction drew a high yield of 1.019% and a bid-to-cover ratio of 2.8.

Earlier in the day, the Labor Department said first-time filings for state unemployment benefits fell by 6,000 to 472,000 in the latest week. See full story on initial filings.

Yields on 10-year notes (UST10Y) moved up 5 basis points to 2.62%, while yields on 30-year bonds (UST30Y) added 6 basis points to 3.71%.

Debt prices move inversely to their yields. A basis point is 0.01%.

The decline comes one day after prices fell sharply following surprisingly upbeat figures on business conditions in the nation's manufacturing sector.

One analyst, however, believes that the choppy bond market is trying to price actions based on fundamentals, but is falling prey to headlines.

"The market that has priced in a lot of bond-friendly news, but like a drug, it needs a stronger fix to do better," said David Ader, head of government bond strategy at CRT Capital Group. "People are positioned pretty neutral, they're going to be trading on choppy volume until something gels, clarifies, on the economy."

On Friday, investors will be looking for a key report on U.S. nonfarm payrolls and the unemployment rate for August.

The government Thursday revised its second-quarter business productivity estimate lower, to a decline of 1.8% from 0.9% initially.

In other economic data, the National Association of Realtors reported pending home sales rose 5.2% in July. See full story on pending home sales.