NEW YORK: Prices for US Treasuries slid on Wednesday as stronger-than-expected economic data pointed to expansion in the euro zone private sector, with investors eyeing a sale of US debt later in the session.
Euro zone private industry bounced back to growth this month as factories increased output for the first time in well over a year, business surveys suggested on Wednesday.
The news helped drive investors into riskier assets such as stocks, said Andrew Wilkinson, chief economic strategist with Miller Tabak & Co. LLC. in New York.
"Likewise, the yield on the 10-year US note has once again rejected sub-2.50 percent levels on signs of growing risk appetite," he added.
The benchmark 10-year note dropped 23/32 in price on Wednesday to yield 2.592 percent, from 2.507 percent late on Tuesday.
The 30-year bond dropped 1-05/32 in price to yield 3.650 percent, up from 3.58 percent late on Tuesday.
Investors were also awaiting a $35 billion auction of five-year notes scheduled for 1 p.m. (1700 GMT).
"The continued cheap funding should help spur demand from investors wishing to put on carry trades, which are getting back in vogue," said Nomura analysts in a note to clients.
The US Treasury sold $35 billion in two-year notes on Tuesday in a sale analysts called uneventful. Capping the $99 billion in new intermediate debt issuance this week, the Treasury will sell $29 billion in seven-year notes on Thursday.
With little significant economic data scheduled for this week, markets are waiting for two key events in the coming week: a two-day policy meeting by the US Federal Reserve and July nonfarm payrolls data.
The Fed meets on Tuesday and Wednesday, and investors will scour the statement on the second day for any hints of when the bank might begin slowing its $85-billion-per-month purchases of Treasuries and mortgage-backed securities.
Most economists continue to expect that the Fed will begin to reduce its bond buys in September, though some have pushed back their expectations to later in the year.
The payrolls data are due on Aug. 2. The health of the labor market will play a major role in the Fed's decision to pull back on bond buying.
Policymakers want to see the unemployment rate closer to 6.5 percent from its current 7.6 percent.
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