"There is definitely a flight to safety," said Todd Schoenberger, managing director LandColt Trading Inc, in San Antonio. "People are taking money off the table, moving into Treasuries from stocks." Stocks began falling as market participants focused on President Barack Obama's proposal to prevent bank ownership or investment in hedge funds for proprietary profit.
"The whole situation is causing stocks to decline - that's creating a flight-to-quality bid for Treasuries," said John Spinello, Treasury bond strategist at Jefferies & Co in New York. "What's going on right now is confusion, and a lot of questions have to be answered now as to how this will be legislated."
The reversal in government bond prices also followed a lower-than expected reading on factory activity in the Mid-Atlantic region from the Philadelphia Federal Reserve Bank. "It does start to paint a mosaic of weaker data," said Christian Cooper, an interest rate strategist at RBC Capital Markets. "We can have these data points that are of themselves not critical, but as we start to see weaker home starts and weaker Fed data, we start to see a mosaic of a weaker recovery."
Jobless claims for the latest week came in above analysts' expectations. However, Cooper said the bond price rally looked more closely linked to movement in stocks than to the data. The benchmark 10-year Treasury note rose 11/32 in price from late on Wednesday, yielding 3.61 percent. The 30-year Treasury bond was up 14/32 to yield 4.51 percent. Shorter-dated bonds also rose. The three-year Treasury note as up 3/32 to yield 1.41 percent. The two-year Treasury note as up 1/32 from late on Wednesday, yielding 0.85 percent.