Bond yields rise after better jobless claims data

NEW YORK — Bond yields are heading higher again, a troubling trend for potential homebuyers or mortgage holders looking to refinance.

The price of the 10-year Treasury note fell Thursday, driving its yield up as high as 3.75 percent, matching last week’s six-month high. Yields, or annual returns, on long-term Treasurys are closely tied to interest rates on mortgages and other loans for consumers.

Mortgage rates have been rebounding after hitting record lows in April. The average rate on a 30-year fixed mortgage this week surpassed 5 percent for the first time since mid-March, mortgage finance giant Freddie Mac said.

A better-than-expected report on jobless claims Thursday and analyst upgrades of bank stocks encouraged investors to move money out of government debt and into stocks. The Dow Jones industrial average rose 75 points, or 0.9 percent, after the Labor Department said the number of workers continuing to receive unemployment benefits unexpectedly dropped last week after rising for 20 weeks.

Inflation worries stemming from the Treasury Department’s growing debt load has also been driving investors out of Treasurys. The Federal Reserve has been buying government debt to offset the increase in supply. On Thursday, the Fed purchased $7.5 billion worth of debt maturing between 2011 and 2012. The buying had little effect on trading, however.

In late trading, the 10-year Treasury note fell 1 11/32 to 94 4/32, and its yield rose to 3.71 percent from 3.54 percent late Wednesday.

The yield on the 30-year bond rose to 4.58 percent from 4.45 percent, as its price fell 2 3/32 to 94 20/32.

The yield on the two-year note rose to 0.97 percent from 0.92 percent, and its price fell 3/32 to 99 26/32.

The yield on the three-month Treasury bill rose to 0.13 percent from 0.12 percent. Its discount rate was 0.14 percent.

As Treasury yields and mortgage rates rise for homeowners, borrowing costs between banks keep falling — a sign that banks can profit more from lending. The British Bankers’ Association said the London Interbank Offered Rate, or Libor, on three-month loans in dollars fell 0.01 of a percentage point to a new record low of 0.63 percent.

On Friday, investors will be focusing on the Labor Department’s monthly jobs report. Economists surveyed by Thomson Reuters anticipate another big cut in payrolls and a rise in the unemployment rate to 9.2 percent.