By Sebastian Pellejero 

U.S. government bond yields extended a recent surge Thursday after new economic data indicated a strengthening recovery from the coronavirus pandemic.

The yield on the benchmark 10-year Treasury note recently traded at 1.462%, according to Tradeweb, up from 1.388% at Wednesday's close. Moves were also pronounced in shorter-dated bonds, with the five-year yield at one point hitting 0.760%, up from 0.612% Wednesday.

Yields, which rise when bond prices fall, climbed after Labor Department data showed that the number of jobless claims fell sharply last week, signaling the job market could be stabilizing after layoffs edged higher earlier in the winter. Investors tend to sell Treasurys and buy riskier assets like stocks when they expect the economy to improve.

Thursday's move extends a recent climb in government bond yields. The yield on the 10-year note, a bellwether for borrowing costs on everything from mortgages to corporate loans, has jumped to near 1.5% from around 1% in a matter of weeks, lifted by increased expectations that vaccines and government stimulus efforts will accelerate growth and inflation.

While Federal Reserve officials have said the yield's climb toward pre-pandemic levels marks a return to normalcy and isn't problematic, some investors are worried that a pickup inflation could force the central bank to raise interest rates faster than expected, said Gennadiy Goldberg, U.S. rates strategist at TD Securities.

"Right now, it seems as though nobody really wants to buy the dip," he said.

Fed Chairman Jerome Powelll told lawmakers this week that while the economy has picked up since the depths of the slowdown, the central bank intends to maintain its easy-money policies until "substantial further progress has been made" toward its employment and inflation goals. The central bank cut interest rates to near zero and committed to buying billions of dollars of bonds to keep U.S. borrowing costs down and help aid the recovery.

If yields continue to rise, that could pressure stocks and increase borrowing costs for companies and consumers, which some worry could fuel further volatility.

"As rates rise, a lot of the products that used Treasurys as their benchmark tend to rise as well, and that produces natural hedging needs for investors," said Mr. Goldberg.

Write to Sebastian Pellejero at sebastian.pellejero@wsj.com

(END) Dow Jones Newswires

February 25, 2021 12:50 ET (17:50 GMT)

Copyright (c) 2021 Dow Jones & Company, Inc.