NEW YORK: US Treasury debt prices eased on Monday as recent evidence the US economic recovery is picking up steam undermined the safe-haven value of government debt.
Losses were limited however and yields remained well within recent ranges as poor euro zone data and concerns about Greece's debt swap, along with China cutting its growth target, maintained some demand for lower-risk assets.
Benchmark 10-year Treasury notes were trading 3/32 lower in price to yield 1.99 percent, up from 1.98 late Friday. Yields remain not far off the middle of the range of 1.79 percent to 2.17 percent that has held since early November.
The Institute for Supply Management reported stronger growth in the vast US services sector in February than investors had forecast, which added to some recent signs the US economic recovery is gaining traction.
"We head into this week in the middle of the recent range, but with renewed conviction that a break higher is possible. This is because tail risks continue to abate and are no longer considered close to base case by most investors, and this improvement should help realign the rates market with economic fundamentals," said George Goncalves, head of US interest rates strategy at Nomura Securities International in New York.
"We look for a near-term target of 2.18 percent before a continuation move higher towards 2.40 percent. The jobs report is important, and we are cautiously optimistic, given the improvement in employment components of recent survey data," Goncalves said.
Early in the day a survey showed that a sharp fall in activity at Italian and Spanish businesses dragged the euro zone's private sector back into decline last month.
Investors also started the week with concerns over whether the Greek debt swap deal, vital to avoid a chaotic default, will go through as the March 8 participation deadline draws near.
Also, China's Premier Wen Jiabao cut the nation's growth target to 7.5 percent for 2012, which fanned concern over the pace of global growth.
The Federal Reserve on Monday was scheduled to sell $1 billion to $1.5 billion of Treasury inflation-protected securities maturing July 2012 through January 2015, as part of its latest economic stimulus program which the financial community has dubbed "Operation Twist."
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