Interest rates rise after inflation, jobs data

Interest rates rose in the bond market Thursday after a fresh batch of economic data showed that the economy continues to slowly regain its strength.

A government report showed inflation at the consumer level remains tame, while another said weekly jobless claims fell. A third reported that the economy is likely to continue to grow, albeit slowly.

The slightly positive news on the economy is draining some cash out of Treasurys.

Treasury bond prices usually fall and yields rise when the stock market goes up. That’s because traders view government bonds as safe investments, while stocks typically are seen as risky but also offering bigger returns.

The yield on the 10-year Treasury note maturing in February 2020 rose to 3.67 percent in trading Thursday from 3.64 percent late Wednesday. Its price fell 9/32 to 99 18/32. The yield of the 10-year note is linked to interest rates on mortgages and other consumer loans.

Earlier in the day, the Labor Department reported that initial weekly jobless claims fell by 5,000 to a seasonally adjusted 457,000 last week. Economists were expecting claims to fall to 455,000.

Although the numbers came up just short of expectations, they marked the third straight week of declines.

In a separate report, the government said consumer prices were flat in February. Excluding the volatile food and energy categories, the core Consumer Price Index edged up just 0.1 percent, matching economists’ estimates.

It was the second straight day the government reported tame inflation figures. On Wednesday, the Labor Department reported that wholesale prices barely rose last month.

The latest report provides additional assurance that the Federal Reserve will not have to raise its key lending rate anytime soon. Earlier in the week, the Fed said it would hold its key interest rate at historic lows for an “extended period.”

But some economists fear inflation could become a problem if the central bank holds its interest rate target at essentially zero for too long. As the economy improves, the Fed will need to start increasing rates to fend off inflation, which could hurt Treasurys.

Even so, in other reports, a gauge of future economic activity rose at its slowest pace in 11 months, indicating the economy isn’t expected to surge anytime soon.

Stocks held on to modest gains, with the Dow Jones industrial average rising more than 41 points in afternoon trading, as overseas markets were mostly down.

In other trading, the yield on 30-year bond that matures in February 2040 rose to 4.59 percent from 4.57 percent. Its price rose 12/32 to 100 15/32.

The yield on the two-year note that matures in February 2012 rose to 0.97 percent from 0.92 percent. Its price fell 3/32 to 99 26/32.

The yield on the three-month T-bill that matures June 17 rose to 0.15 percent from 0.14 percent.