September 1, 2015 / 3:08 PM / 2 years ago

TREASURIES-Medium-, short-dated prices gain on weak U.S., China data

* China manufacturing contracts at fastest pace in 3 years in Aug

* U.S. manufacturing sector growth weakest in over 2 years in Aug

* U.S. long-dated Treasuries prices edge lower

By Sam Forgione

NEW YORK, Sept 1 (Reuters) - U.S. short- and medium-term Treasuries prices rose on Tuesday after data showing weakness in Chinese and U.S. manufacturing in August fueled safe-haven bids for U.S. debt, while long-dated Treasuries prices slipped on possible selling by a foreign central bank.

The Chinese government’s measure of manufacturing showed activity contracted at the fastest pace in three years, denting hopes of a second-half pickup as Asia tries to fire up its traditional growth engine of exports.

In addition, the Institute for Supply Management said its index of U.S. factory activity fell to 51.1 in August from 52.7 in July, marking the slowest growth in more than two years.

“Clearly, the markets are focused on China and the prospects for Chinese growth, so any disappointment in those growth statistics is going to be noticed,” said market strategist Lou Brien of DRW Trading in Chicago.

The U.S. data also spurred bids for safe-haven U.S. government debt maturing in 10 years or earlier, he said.

Benchmark 10-year yields hit a session low of 2.15 percent after reaching a 1-1/2 week high of 2.22 percent on Monday.

U.S. 30-year Treasuries prices dipped, with analysts citing the possibility that a central bank could be selling the bonds.

Analysts said low liquidity in the bond market could be exaggerating price activity, while caution ahead of Friday’s U.S. non-farm payrolls report for August also kept traders from making significant bullish or bearish bets.

Economists expect the report to show U.S. employers added 220,000 jobs in August, up from 215,000 in July, according to a Reuters poll. The U.S. Federal Reserve is watching the labor market for guidance on the timeline for raising interest rates.

“Friday could really be a make-or-break for September’s Fed meeting,” said interest rate strategist Justin Lederer of Cantor Fitzgerald in New York.

U.S. 10-year Treasuries were last up 6/32 in price to yield 2.18 percent, from a yield of 2.20 percent late on Monday. The 30-year bond was down 9/32, with the yield rising to 2.95 percent from 2.93 percent.

U.S. 30-year yields still held below Monday’s one-month high of 2.965 percent.

Two-year notes were up 1/32 to yield 0.72 percent, from a yield of 0.74 percent late on Monday. (Reporting by Sam Forgione; Editing by Lisa Von Ahn)

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