NEW YORK: US Treasuries yields rose on Monday, after falling to one-year lows last week, as investors completed month-end bond purchases and before a highly anticipated European Central Bank meeting and US employment report due later this week.
Yields have fallen on expectations that the ECB will cut interest rates and take other measures meant to stimulate growth when it meets on Thursday.
Balance sheet repositioning and index extension buying also boosted demand for Treasuries last week, with demand ebbing on Monday.
"We're getting a repricing as the market finds its footing ahead of a big week of releases with the ECB and payrolls at the end of the week," said Eric Bergstrom, co-head of US rates trading at BMO Capital Markets in Chicago.
Benchmark 10-year notes fell 7/32 in price to yield 2.51 percent, up from an 11-month low of 2.40 percent on Thursday.
Thirty-year bonds fell 14/32 in price to yield 3.36 percent, up from an 11-month low of 3.27 percent on Thursday.
Dovish central banks and disappointing economic growth in the first quarter have helped yields fall this year, scuttling expectations that they would rise.
At the same time, more economic stimulus from the ECB is making investors bet that growth and inflation may accelerate, which could send yields back higher.
"People are thinking that maybe the data isn't going to be as bad and the ECB will do some kind of credibly dovish action on Thursday that will increase things like inflation expectations and growth expectations," said Ira Jersey, an interest rate strategist at Credit Suisse in New York.
Bonds briefly pared price losses on Monday after data showed that the pace of growth in the US manufacturing sector unexpectedly slowed in May.
The Institute for Supply Management (ISM) said its index of national factory activity fell to 53.2 last month from 54.9 in April, and the employment index dropped to 51.9 from 54.7 in the same time frame.
"It was slightly disappointing data. The interesting part was the employment component was down, the ISMs are highly correlated to payrolls," said Bergstrom.
The jobs report for May will be released on Friday.
Short covering by investors that had bet that stronger US growth would send Treasuries yields higher has also helped US bonds rally in recent weeks, though there are signs that more of these shorts have now been covered.
Speculators' net bearish bets on US 10-year Treasury note futures fell to their lowest in three months as the bond market rallied in May on worries about the US economy, according to Commodity Futures Trading Commission data released on Friday.
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