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TREASURIES-Longer-dated Treasuries yields edge higher on U.S. data
April 1, 2014 / 3:47 PM / 4 years ago

TREASURIES-Longer-dated Treasuries yields edge higher on U.S. data

* ISM data shows factory activity rose in March

* Intermediate-dated notes stable on Yellen comments

* Traders eye Friday U.S. jobs report

By Sam Forgione

NEW YORK, April 1 (Reuters) - Longer-dated U.S. Treasuries yields edged higher on Tuesday after upbeat U.S. manufacturing data, while intermediate-dated Treasuries yields held steady in the wake of recent comments from Federal Reserve Chair Janet Yellen.

The Institute for Supply Management said its index of national factory activity rose to 53.7 in March. While that was below economists’ median forecast of 54.0, it still marked a second straight month of accelerated growth.

“We are out of the woods with regards to bad weather,” said Wilmer Stith, fixed income portfolio manager for Wilmington Trust in Baltimore, Maryland, in reference to frigid temperatures which hurt economic data at the start of the year.

He said the data led to slight selling pressure on longer-dated Treasuries. Longer-term Treasuries bonds tend to decline in price in reaction to positive economic data, which signal stronger growth and inflation, which erode the value of longer-dated debt more than short-dated issues.

The 30-year Treasury bond last traded down 22/32 in price to yield 3.6 percent, compared to a yield of 3.56 percent late Monday. The benchmark 10-year U.S. Treasury note was last down 8/32 in price to yield 2.76 percent, compared to a yield of 2.72 percent late Monday.

Short- and intermediate-dated Treasuries notes were roughly unchanged, meanwhile, in the wake of Yellen’s comments on Monday, which were perceived as more dovish than earlier remarks.

Yellen gave a strong defense of the Fed’s easy-money policies in a speech to a community investment conference in Chicago Monday, offsetting comments perceived as more hawkish at a March 19 press conference.

The March 19 comments, which included a suggestion that the Fed could raise interest rates earlier than expected, triggered a selloff in Treasuries, especially short- and intermediate-dated notes.

“We’re seeing somewhat of a reversal in the negative price movements,” said Stith of Wilmington Trust.

The five-year Treasury note was last down 1/32 in price to yield 1.74 percent, compared to a yield of 1.73 percent late Monday. The 2-year Treasury note last traded roughly flat on the day with a yield of 0.43 percent.

Traders also eyed Friday’s U.S. employment report for March, which could be strong and spur more selling of longer-dated Treasuries. Employers are expected to have added 195,000 jobs in March, according to the median estimate of economists polled by Reuters, up from 175,000 in February.

“We revert to a patient mode pending, mostly, Friday’s data,” said David Ader, head of government bond strategy at CRT Capital Group in Stamford, Connecticut, in a research note.

On Wall Street, all three major stock indexes were higher, with the Standard & Poor’s 500 last up 0.42 percent. (Reporting by Sam Forgione; Editing by James Dalgleish)

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