* Philadelphia business conditions strongest since 1984
* Bonds rally with German debt, weaker dollar
By Karen Brettell
NEW YORK, Feb 16 U.S. Treasury prices firmed on
Thursday as higher yields sparked by rising expectations of an
impending interest-rate hike drew some new buyers, though bonds
gave up some of their price gains on strong economic data.
U.S. bond yields have jumped since Federal Reserve Chair
Janet Yellen took a more hawkish than expected tone in testimony
to lawmakers on Tuesday, indicating that further rate hikes are
likely in the coming months.
A jump in consumer price inflation on Wednesday added to
this sentiment, though higher yields have nonetheless attracted
new buyers to the bonds.
"The market's been very resilient, we got very strong data
yesterday and this morning...but yet the market remains fairly
well bid," said Dan Mulholland, head of Treasuries trading at
Credit Agricole in New York.
The Philadelphia Federal Reserve's index of business
conditions on Thursday rose to its highest level since 1984.
Benchmark 10-year notes were last up 5/32 in
price to yield 2.48 percent, down from 2.50 percent late on
Treasuries have held within their recent range even as
investors prepare for the potential for three rate hikes this
year, with 10-year notes trading between 2.31 percent and 2.52
percent since the beginning of the year.
"It seems like there is an underlying bid in that 2.50
(percent) area in 10-year notes," said Mulholland.
A rally in German government bonds also helped support U.S.
Treasuries on Thursday, while a weaker dollar boosted the bonds.
"We've been following the dollar index kind of tick for
tick. When the dollar strengthens U.S. Treasuries selloff, when
they dollar weakens they rally," said Mulholland.
Demand for inflation-linked debt will also be tested on
Thursday when the Treasury Department sells $7 billion in
30-year Treasury Inflation-Protected Securities (TIPS).
The Labor Department on Wednesday said its Consumer Price
Index jumped 0.6 percent last month, the largest gain since
(Editing by Bernadette Baum)