Last week's abbreviated Christmas Eve trading followed a long tradition of uneventful holiday sessions, with most participants either already home for the holidays or sidelined with baby-sitting duties at work.

By the end of the New York session the long bond was down 3/32 point, to yield 7.35%. Note prices rose slightly, and rates on bills were mostly unchanged, with trading locked in a narrow range.

The session officially wrapped up at 1 p.m. eastern standard time, but was actually finished much earlier in the day. Market participants said there was virtually no activity, and most paid little attention to the initial state unemployment claims data released early in the day.

The Labor Department reported that claims increased 12,000, to a seasonally adjusted 360,000 in the week ended Dec. 12. That was the highest level since the week ended Nov. 21, when claims were 362,000.

The market had been expecting a slight decline in claims, but the unexpected rise falled to muster much upward price pressure.

Part of the market's aloofness might be explained by the mixed signals the data included. The number of people receiving state unemployment benefits declined 38,000, to 2.9 million, in the week ended Dec. 5. That was the lowest level in two years.

In addition, the insured unemployment rate fell to 2.7% from 2.8%. About 1.5 million people applied for extended unemployment benefits during the week.

Dana Johnson, head of market analysis at First Chicago Bank, said despite the rise in initial claims, overall "the data are saying that there's a moderate improvement in the labor market when you look at trends, rather than the most recent week's figures."

That improvement supports the underlying market perception that a recovery is under way, however sluggish.

Market sources looking at the short-term horizon say this week and early January will likely mirror recent trading sessions, with little news expected to affect the prevailing views on the direction of the economy.

"Everybody's comfortable with the idea that the Fed doesn't need to do anything right now," Johnson said. "The recovery is in place, but it still looks like a moderate recovery. So there's no need for the Fed to move in either direction."

He added that upcoming economic releases are not the sort likely to change that view.

"I think it's going to be hard to find anything other than range-bound trading for the next few weeks," Johnson predicted.

In late when-issued trading Thursday, the five-year notes auctioned Wednesday were priced to yield 6.03%. The two-year notes auctioned Tuesday were priced to yield 4.65%.

The March futures contract closed 1/2 point lower, at 105 3/32.

In the cash market, the 7 5/8% 30-year bond was 3/32 point lower, at 103 2/32-103 6/32, to yield 7.35%.

The 6 3/8% 10-year note was off 2/32, at 97 26/32-97 30/32, to yield 6.66%.

The three-year 5 1/8% note was up 1/32, at 100 3/32-100 5/32, to yield 5.06%.

Rates on Treasury bills were mixed, with the three-month bill unchanged, at 3.17%. the six-month bill one basis point higher, at 3.31%, and the year bill unchanged, at 3.47%.

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