Treasury prices mostly fell in the final day of 2009 after a surprise drop in weekly jobless claims sent interest rates higher.
Investors took the latest government report as further evidence that the economy is recovering. The Labor Department said Thursday that new claims for unemployment benefits fell by 22,000 to a seasonally adjusted 432,000 last week. Analysts had expected claims would rise. The number of workers continuing to seek unemployment benefits fell by 57,000 to 4.9 million. Analysts predicted an increase.
The price of the benchmark 10-year note fell 12/32 to 96 6/32 and its yield rose to 3.84 percent from 3.79 percent late Wednesday. The yield on the 10-year note is closely tied to rates on consumer loans such as mortgages.
The 10-year yield began 2009 at 2.22 percent, a reflection of investors' intense need for the safety of government debt amid rising uncertainty about the economy, the banking system and the stock market. As the economy has recovered, bond prices have slipped back and yields, which move in the opposite direction, have moved higher.
Thursday's data further depressed demand for safe havens. Moreover, many investors were already on vacation in advance of New Year's Day, and that made for a lightly traded day.
"My guess is that the Treasury market could be up or down on light volume and a lack of interest," said Kevin Giddis, managing director of fixed income at Morgan Keegan, in a research note.
Despite Thursday's retreat, the bond market held up well this week as the Treasury sold $118 billion of two-year, five-year and seven-year notes with relative ease. Investors have been concerned that the government's sales of debt this year to fund its economic stimulus programs would flood the market, depressing prices, but the auctions have generally been well received.
Still, analysts say there is still some uneasiness in the market about an oversupply of Treasurys.
Giddis said of the week's mostly upbeat trading, "that could correct itself next week, but enjoy the moment."
Stocks received an initial boost Thursday from the jobless numbers, but the market gave back gains as investors bet that the government will pull back on its stimulus measures. Investors questioned how well the economy will do without the government's support.
In other Treasury trading, the price of the 30-year bond fell 10/32 to 95 27/32, and its yield rose to 4.63 percent from 4.61 percent.
The yield of the two-year note rose to 1.15 percent from 1.09 percent.
The yield on the three-month T-bill rose to 0.05 percent from 0.03 percent. The discount rate was 0.05 percent.
The cost of borrowing between banks was unchanged. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ was flat at 0.2506 percent.