Bonds fall on better-than-expected economic data

NEW YORK — Fresh evidence of an improving economy pushed long-term Treasury yields higher on Thursday — a troubling sign for homeowners and those interested in buying a home.

Yields on long-term Treasurys are closely tied to interest rates on mortgages and other consumer loans. Borrowing costs have already been on the rise, but climbing yields could push them even higher, potentially putting a crimp on an economic recovery.

The yield on the 10-year Treasury note jumped to 3.81 percent from 3.69 percent late Wednesday as its price fell 29/32 to 94 11/32. Last week, the 10-year yield had soared to an 8-month high of 4.01 percent.

Treasurys sold off sharply after the Labor Department said the overall number of people drawing unemployment benefits fell for the first time since early January. The drop broke a string of 21 straight increases.

Later Thursday, a private sector group said its forecast of economic activity rose more than expected in May, marking a second straight month of gains after seven months of declines. And the Philadelphia Reserve Bank said manufacturing around the mid-Atlantic region has improved. This spurred more selling in the Treasury market.

Christian Cooper, interest rate strategist at RBC Capital Markets, said worries about the large supply of debt in the market tend to escalate when there is positive economic data to support a move into riskier assets such as stocks. On Thursday, stocks finished mostly higher after three straight days of losses.

News that the Treasury Department has slightly increased the amount of debt it plans to issue next week further rattled the market Thursday. The Treasury will auction off a total of $104 billion in two, five and seven-year notes next week.

Worries over the vast amounts of government debt hitting the market and the subsequent potential for inflation have plagued investors for weeks. These fears have put pressure on the Treasury market, sending yields higher.

The yield on the 30-year bond rose to 4.59 percent from 4.52 percent late Wednesday as its price fell 1 point to 94 17/32.

The two-year note’s yield jumped to 1.26 percent from 1.17 percent, as its price fell 5/32 to 99 8/32. The yield on the three-month Treasury bill rose slightly to 0.17 percent from 0.16 percent. Its discount rate was 0.18 percent.

The cost of three-month dollar loans between banks was unchanged for a third straight day. The British Bankers’ Association said the rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — held steady at an all-time low of 0.61 percent.