Treasury prices advanced, pushing yields on 10yr notes to the lowest level in more than 2 weeks, as the government's last debt auction of the week received strong demand.

The gains started earlier as the Labor Dept. reported an unanticipated increase in first-time weekly jobless claims, raising concerns that continuing weakness in the job market will slow the economy's recovery.

Government debt also found support in renewed worries about Greece's debt problems.
Yields on 10yr notes fell 5bps to 3.65%. They briefly touched 3.62%, the lowest since Feb. 8.
Yields on 2-year notes declined 2bps to 0.82%.

Wrapping up a heavy week for debt auctions, the Treasury Dep.t sold $32B in 7yr notes at a yield of 3.078%, a lower level than traders had been expecting, indicating good demand. Bidders offered to buy 2.98 times the amount being sold, the highest ratio since the government resumed issuance of the maturity a year ago. Indirect bidders, a group that includes foreign central banks, bought 40.3% of the securities for sale, down from an average of 54.4% at the last four auctions. Direct bidders, which include domestic money managers, took another 17.2%, by far the biggest portion bought by the group in the last year. The group's take has increased notably in recent auctions, averaging 7.9% lately.

More of the auction going to direct or indirect bidders, as opposed to primary dealers, is deemed good for the government and the market. That's because primary dealers tend to turn around and sell much of the new purchases, weighing on prices.

This week, the government brought $126B of debt to market, including offerings of 30yr inflation-linked debt, 2yr and 5yr securities.

 
Increasing the attractiveness of U.S. debt earlier, the government said the number of people filing initial claims for state unemployment benefits rose last week by 22K to 496K, though bad weather may have played a role. Economists had been looking for claims to drop to 460K in the week ended Feb. 20.

 
A second government report showed durable-goods orders surging 3% last month, double the forecast of economists on aircraft orders. Excluding the big gain in transportation orders, orders for so-called big-ticket items fell 0.6% in January.

In his second day of congressional testimony, Fed Chairman Ben Bernanke reiterated comments made Wednesday, saying benchmark interest rates would remain low "for an extended period."

 
Meanwhile, Greece was warned by both S&P's and Moody's Investors Service that its credit rating may be downgraded further within a month if proper spending cuts aren't enacted, which would put the country near losing an investment-grade rating, according to media reports.