U.S. Treasurys lost favor on Thursday as encouraging economic signs dampened hopes that the Federal Reserve will buy bonds to help spur growth.
The number of people seeking unemployment benefits fell slightly last week to the lowest point in four years, the latest signal that the job market is strengthening.
Surveys of manufacturing executives in China, Europe and the U.S. indicated that factory production is growing modestly in most parts of the world. China's factory sector strengthened on a surge of new orders, exports and production, according to a government survey. A European manufacturing index reached its highest level in six months, though it fell just shy of the level that would indicate growth.
U.S. manufacturing activity expanded for the 31st straight month, according to the Institute for Supply Management. Factory activity grew more slowly than in recent months, but remains strong enough to appear sustainable.
Positive economic data tend to drive Treasurys lower as traders sell the ultra-safe, low-yielding investments and buy riskier assets like stocks.
Traders have been speculating for months about the possibility that the Fed will buy more bonds to hold down interest rates and encourage investment. If the Fed appears likely to enter the market, bonds tend to rise.
Many believe that the Fed is less likely to take aggressive action because the economy is healing faster than expected. Comments on Wednesday by Fed Chairman Ben Bernanke added to that speculation.
Traders sold Treasurys, sending the yield on the 10-year Treasury note up to 2.03 percent from 1.99 percent late Wednesday. The price of the 10-year note fell 44 cents for every $100 invested. Bond yields rise when their prices fall.
The yield on the 30-year Treasury bond rose to 3.14 percent from 3.10 percent late Wednesday. Its price fell by $1.19 per $100 invested.
The yield on the two-year note fell to 0.29 percent from 0.30 percent late Wednesday.
The three-month Treasury bill paid a yield of 0.07 percent.