By Richard Leong
NEW YORK (Reuters) - U.S. Treasury debt prices rose on Thursday, driving yields to fresh historic lows, as investors flocked to long-dated bonds to try to lock in safe returns at year-end.
Bonds rallied for a third straight session since the Federal Reserve cut its benchmark interest rate target to near zero percent to try to end a year-long recession.
The U.S. central bank also said on Tuesday after its policy meeting it was considering to buy long maturity Treasuries as it pledged to purchase mortgage securities with the goal to revive the housing market, the center of the economic malaise.
The market run-up is "just the continuation of the risk aversion trade that has been going on for quite some time," said Kevin Giddis, head of fixed income sales, trading and research at Morgan Keegan & Co. in Memphis, Tennessee.
The price on benchmark 10-year Treasury notes last traded up 1-3/32 at 114-26/32. Their yield, which moves inversely to price, was 2.087 percent compared with 2.203 percent late Wednesday. It was above the 2.085 percent set earlier, which was the lowest level seen since the early 1950s.
The 30-year bond, the longest Treasuries maturity,, was up more than 1-1/2 points with its yield at 2.585 percent, a record low.
Bonds came off their highs briefly after a pair of reports confirmed the view of an economy in recession though perhaps not deteriorating as rapidly as some traders had feared.
The government said first-time filings for unemployment benefits came roughly in line with analyst forecasts last week, though they remained deep in recessionary territory.
"This provides further evidence that not only are we in a deep recession, it may be one of the worst recessions seen in the past 50 years," said Dana Saporta, an economist at Dresdner Kleinwort in New York.
Initial jobless claims fell by 21,000 last week, but the four-week moving average, which evens out weekly volatility, rose by nearly 3,000 to keep it near a 26-year high.
Meanwhile, factory activity in the Mid-Atlantic region fell but at a slower pace in December than November, according to the Philadelphia Fed report.
Among ultra short-dated debt, the rate on three-month Treasury bills was near zero percent after dipping briefly into negative territory, underscoring the intense bids for cash among jittery investors.
On the supply front, the Treasury Department will announce details of its monthly auctions of two-year and five-year debt, which will take place next week.
(Additional reporting by Burton Frierson)
