TREASURIES-Prices up as jobless claims top forecast

* New jobless claims top forecast in latest weekly count

* Claims totaled 388,000, exceeding forecast for 380,000

* Previous week claims revised up to 394,000 from 382,000

* Focus to shift to U.S. employment report on Friday
(Updates prices, comment)

By Ellen Freilich

NEW YORK, March 31 (Reuters) – U.S. Treasuries prices rose
on Thursday after the latest figures on jobless claims offered
a less robust picture of the labor market.

New U.S. claims for jobless benefits topped the consensus
forecast, though claims were down from an upwardly revised
figure for the previous week. The data on jobless claims comes
a day ahead of the closely watched government report on
payrolls.

Along with annual revisions, the data left the March
payroll picture “influencing the employment data tomorrow,
technically a bit less strong,” said Pierre Ellis, senior
economist at Decision Economics in New York.

Benchmark 10-year Treasury notes (US10YT=RR: Quote, Profile, Research), up 1/32
before the jobless claims data, were up 6/32 afterwards, their
yields easing to 3.41 percent from 3.44 percent on Wednesday.

Thirty-year bonds, which would be hurt by inflation
expectations since inflation erodes the value of fixed-income
investments, rose 17/32, their yields easing to 4.47 percent
from 4.51 percent.

New claims for unemployment fell last week to a seasonally
adjusted 388,000. Data was revised back to 2006 to take into
account new seasonal factors. For the week ended March 19,
continuing claims fell to 3.7 million. [ID:nOAT004773]http://r.reuters.com/xyv78r

Ellis said hiring was “very restrained” relative to the
declines in layoffs. But if the March U.S. employment figure
comes in on the strong side on Friday, that would raise
confidence that new hiring is finally normalizing.

“That would keep expectations for April strong, despite the
apparent flattening-out in layoffs,” he said.

Economists polled by Reuters have estimated that non-farm
payrolls rose by 190,000 in March, after expanding by 192,000
jobs in February.

Though the trend in jobless claims has been downward over
the past few months, David Resler, chief economist at Nomura
Securities, said the steadiness in the jobless claims suggested
that the March unemployment rate would be unchanged from the
8.9 percent rate in February.

Treasuries will settle into “a form of suspended animation
as investors prepare for a bumpy ride” over the next 24 hours
or so, said William O’Donnell, head of U.S. Treasury strategy
at RBS Securities in Stamford, Connecticut.

Irish bank stress tests and a mix of Fed Treasury
purchases, such as Thursday’s operation in the front end of the
bond curve, could be supportive with no offsetting Treasury
coupon supply until April 12.

“Technical conditions remain generally supportive of higher
bond prices,” O’Donnell said, citing JP Morgan and Stone &
McCarthy surveys showing portfolios have gotten shorter versus
their benchmarks over the past week.

The Daily Sentiment Index also shows a small minority of
bulls for U.S. bond and note futures, he said.

This means “we have a reasonably well-developed short base
that should act as a cushion for bond prices on bad news — or
an accelerant for bond prices if data or news spurs a rally,”
O’Donnell said.

Support for 10-years lies at 3.56 percent while resistance
remains around the 3.25 percent area, he said.

Treasuries prices clung to positive territory after the
Institute for Supply Management-Chicago said its index of
Midwest business activity fell in March to 70.6 from 71.2 in
February, still showing expansion in the manufacturing sector.
(Editing by Leslie Adler)

TREASURIES-Prices up as jobless claims top forecast