GM Generali

By Deborah Levine

Treasurys prices declined Thursday, sending yields higher for a fourth consecutive session, as the government got ready to sell $22 billion in 7-year notes, the last of three record-sized note auctions conducted this week.

Growing government-debt issuance is in sharp focus as President Barack Obama released his first budget amid plans to come to grips with a yawning federal deficit.

Short-term U.S. debt pared their declines, however, as a pair of economic reports indicated an even weaker-than-expected labor market and as well as declining orders for manufactured goods.

Ten-year note yields (UST10Y) rose 5 basis points, or 0.05%, to stand at 2.98%. Yields earlier had topped 3% for the first time since Feb. 9.

Two-year note yields (UST2YR) also increased, up 2 basis points to 1.11%.

Bond prices move inversely to their yields.

The sale of 7-year notes is the first offering of the maturity since 1993. It's part of the Treasury Department's plan to increase bond issuance to finance all of the programs and stimulus enacted by the Federal Reserve and Congress in the hopes of stabilizing financial markets and helping bring the recession to an end.

On Tuesday, the Treasury sold $40 billion in two-year notes, followed by $32 billion in five-year notes on Wednesday. Both sales received decent overall demand from investors but failed to inspire a rebound for the broader market.

On the data front, first-time applications for state unemployment benefits rose 36,000 last week, reaching a seasonally adjusted 667,000, the highest since October 1982. And for the week ended Feb. 14, the number of people collecting benefits climbed to a record 5.11 million, the Labor Department reported.

"The unemployment claims data are indicating a significant pickup in the pace of job loss in February and a further rise in the unemployment rate," said economists at RDQ Economics. Theyexpect the government employment report for February, to be released next week, to show that the economy lost 750,000 jobs.

Separately, orders for durable goods fell a more-than-predicted 5.2% in January, extending their recent string. Orders had never fallen six months in a row since the Commerce Department began collecting this data in 1992.

Also Thursday, sales of new homes fell 10.2% in January to a record low, data showed. The Commerce Department said sales fell to seasonally adjusted annual rate of 309,000, worse than economists anticipated.

The weak data aren't helping bonds, and any rise in equities has pressured fixed-income though weaker stocks have not helped recently, said strategists at RBS Greenwich Capital.

"It's possible that the market has reached the point where there is more supply than demand all other things being equal," they wrote in an email.

GM's bonds in spotlight

In corporate-bond activity, General Motor Corp.'s bonds held up after the embattled automaker (GM) said it lost $9.6 billion in the forth quarter and burned through $6.2 billion in cash.

GM's 7.125% bonds maturing in 2013 were trading around 15 cents on the dollar on Thursday, unchanged from Wednesday, according to KDP Advisors. The bonds fell to as low as 13 cents earlier in the month.

Companies have seen plenty of demand for new sales of debt this month. Investors have been attracted to relatively high yields that offer what many fund managers consider returns similar to equities in an average year -- and far better than equities have performed lately.

February is, so far, the third-busiest month on record for the issuance of corporate bonds, according to Dealogic.