Weak economic data boost bond prices
Yields decline on Treasurys across the board as unemployment claims and home sales reports weigh on stocks.
NEW YORK (CNNMoney.com) -- Treasury prices were higher Thursday on worse-than-expected unemployment claims data and existing home sales, indicating that the economy is still under pressure and providing motivation for investors to seek the safety of longer-term government bonds.
The benchmark 10-year note rose 15/32 to 98 17/32, and its yield fell to 4.00% from 4.11% late Wednesday. Bond prices and yields move in opposite directions.
The 30-year long bond jumped 30/32 to 96 5/32, with the yield falling to 4.60% from 4.67% late Wednesday.
The newly auctioned 2-year note rose to 100 8/32 from 100 6/32 late Wednesday, pushing the yield down to 2.61% from 2.76%.
Unemployment data: The Labor Department reported Thursday that the number of new applications for unemployment benefits for the week ended July 19 rose by 34,000 to 406,000, which was significantly higher than analysts were predicting for the week.
This new data "indicates further weakness in the labor market ahead," according to Peter Cardillo, chief market strategist at Avalon Partners.
Economists were waiting for the monthly jobs report, which was due out Aug. 1. Analysts are looking for the unemployment rate to rise to 5.6% in July from 5.5% in June.
Housing market: The National Association of Realtors reported that sales of existing homes slowed more than expected in June while inventory increased. Sales by homeowners dipped in June to an annual pace of 4.86 million, down 2.6% from 4.99 million in May.
"We had existing home sales which declined again and the inventory picture continues to indicate a market that is satiated and is not ready to stabilize," said Cardillo.
The double whammy of weak economic data from both the labor market and the housing market pushed investors into the bond market Thursday, said Cardillo.
While the House did pass a bill on Wednesday night that stands ready to pump $300 billion into the struggling housing market, the news did not stop investors from moving their assets into the safety of government bonds.
While the housing bill "is a step in the right direction, it certainly does not mean the housing market is going to turn on a dime," said Cardillo. "It is a beginning of a solution."
Stock market: Stocks fell Thursday, dragged down by the negative economic news.
The bond market is "trading very well on the back of the weak stock market," said Michael Cheah, a bond fund manager at AIG Sun America.
According to Cheah, Wall Street factored in the news of the House passing the housing support legislation before Thursday.
By the time the "the legislation is passed, it is no longer new news," said Cheah. The stock market is already looking forward for a reason to be optimistic about the economy, but investors "are getting out until the next possible good news comes," he said. 
