Bonds end slightly stronger

Most US Treasury yields fell modestly on Thursday after a choppy trading day as investors grappled with mixed data on the US economy and concerns about Greece's stand-off with its creditors. Treasuries have rallied in recent weeks as a weaker-than-expected March employment report and other data pointed to slowing growth that is expected to keep the Federal Reserve's expected raise in interest rates on hold for longer.
Investors are been reluctant to hold large exposures to the bonds, however, on the risk that yields may rise if the economy rebounds from a weak first quarter.
"Everyone has gotten so bearish on the economy, the risk is now to the upside," said Gennadiy Goldberg, an interest rate strategist at TD Securities in New York.
Benchmark 10-year notes were last up 3/32 in price to yield 1.88 percent after earlier rising to 1.92 percent. Yields rose after Fed Vice Chairman Stanley Fischer said in an interview on CNBC that the US economy was rebounding and that he saw signs that wage pressures are rising, bringing inflation up toward the central bank's 2 percent target.
A Philadelphia Federal Reserve Bank survey also showed that factory activity in the US Mid-Atlantic region accelerated in April.
Some investors are nervous about buying bonds before Friday's consumer price index release. Low inflation is seen as complicating the Fed's ability to raise interest rates, although the last two CPI releases have beaten expectations and prompted selling in US Treasuries.
"Nobody wants to step into buy in front of CPI in case it surprises and exceeds forecasts yet again," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis, Tennessee. "The minute bond prices moved up, people started selling again."
Atlanta Federal Reserve Bank President Dennis Lockhart said on Thursday that he favoured a rate hike later in the year rather than in June, given the cloudy data from the first few months of 2015.
The yield curve also steepened as investors remained cautious on Greece. International uncertainties are among the headwinds that may lead the US central bank to push back a rate hike.
"The story on Greece continues to be a concern for the market," said Sean Murphy, a Treasuries trader at Societe Generale in New York.
The curve between five-year note yields and 30-year bond yields increased to 126 basis points, the steepest since April 6.