TREASURIES-US yields edge higher as jobless claims fall

By Karen Brettell

July 10 (Reuters) - Benchmark 10-year U.S. Treasury yields edged higher on Thursday after data showed that jobless claims unexpectedly fell last week and as investors focused on how tariffs will impact inflation ahead of key consumer price data due next week.

The drop in the number of Americans filing new applications for jobless benefits suggests that employers may be holding on to workers despite other indications of a cooling labor market.

"Jobless claims came in pretty solid," but the labor market is showing more signs of weakness, said Rob Waldner, fixed income chief strategist and head of macro research at Invesco.

"The dynamic is a much more stagnant labor market where there's a bit of labor hoarding going on. People are holding on to employees and there's less churn, so it's harder to get a job," Waldner said.

Thursday's data also showed that continuing claims rose to the highest level since November 2021.

The Federal Reserve is expected to hold rates steady as it waits to see the impact of U.S. President Donald Trump's tariff policies, but the expectation of only a brief inflation uptick and slowing growth is seen as leading the U.S. central bank to cut rates later this year.

Invesco anticipates inflation will peak later this year and fall again next year, which will support Fed rate cuts.

"We're growing a little more constructive on the Treasury market overall," Waldner said.

Fed funds futures traders are pricing in 53 basis points of cuts by the end of this year.

St. Louis Fed president Alberto Musalem said on Thursday that it could be the end of this year or early into 2026 before it is clear how much impact rising import tariffs will have on inflation.

Fed Governor Christopher Waller, meanwhile, reiterated his belief the central bank could cut interest rates at its policy meeting later this month .

Waller also said that the Fed still has some ways to go in shrinking the size of its holdings.

Trump on Wednesday announced a new 50% tariff on U.S. copper imports and a 50% duty on goods from Brazil, both to start on August 1.

The next major inflation indicator will be consumer price inflation data for June due on July 15.

The interest rate sensitive 2-year note US2YT=RR yield rose 0.6 basis points to 3.868%.

The yield on benchmark U.S. 10-year notes US10YT=RR was last up 0.4 basis points on the day at 4.346%.

The 30-year bond US30YT=RR fell 1.4 basis points to 4.861%.

Yields pared an earlier increase after the Treasury Department saw solid demand for a $22 billion sale of 30-year bonds.

The debt sold at a high yield of 4.889%, close to where it had traded before the auction. Demand was below average at 2.38 times the amount of debt on offer.

The auction was the final sale of $119 billion in coupon-bearing supply this week.

The government saw strong interest for a $39 billion sale of 10-year notes on Wednesday and slightly soft demand for $58 billion in three-year notes on Tuesday.

Treasury Secretary Scott Bessent said last week that there are no plans to increase longer-dated auction sizes at current interest rates, which has helped support demand for longer-dated debt.