NEW YORK: US Treasury debt prices rose on Monday on bargain hunting encouraged by fresh signs of spotty economic growth, which might slow the Federal Reserve's shift away from loose monetary polices.
After a sell-off last week, which saw benchmark 10-year Treasury note yields rise to 2.613 percent on Friday from 2.476 percent on Sept. 5, the 10-year on Monday was up 7/32 in price to yield 2.589 percent.
The 30-year bond was up 17/32 in price to yield 3.32 percent, versus 3.345 percent at Friday's close in New York.
"It's that circular argument that weak growth is going to inhibit the Fed from raising rates any time soon," said Kim Rupert, managing director at Action Economics in San Francisco.
U.S. manufacturing output unexpectedly fell for the first time in seven months in August as motor vehicle production declined, but the underlying trend remained consistent with steadily rising factory activity, according to Fed data released on Monday.
Trading was also driven in part by unexpectedly strong New York State manufacturing data but which also contained weak jobs indicators, Rupert said.
While manufacturing activity in New York State accelerated at its fastest pace in nearly five years in September, the report from the Federal Reserve showed measures of employment slowing.
"The employment components took some of the wind out of the stronger figure, however, with the number of employees falling to 3.26 from 13.64 (the lowest this year) and the average workweek declining," TD Securities strategist Gennadiy Goldberg told clients.
Other signs of softening economic expansion overseas were also encouraging buying of U.S. debt, Rupert said.
"Over the weekend, we had some weakened industrial production from China and then the OECD nudged their forecast for growth in developed economies a little bit lower," she said. "Growth concerns are factoring into the market."
Federal Reserve policymakers this week meet for two days and may on Wednesday signal an increased tilt toward raising interest rates now widely expected to occur during 2015.
Fed Chair Janet Yellen's view has been that a sharp drop in the unemployment rate over the last year has masked substantial weakness in the labor market. That could give her room to keep interest rates at rock-bottom levels well into next year - without inflation becoming a threat.
Shorter term Treasuries also rose on Monday.
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