Yields fall from highs after weak NY manufacturing data

NEW YORK: US Treasury yields fell from session highs on Monday after a New York state manufacturing survey turned negative for the first time since October, adding to a recent string of weakening data.

The Empire State manufacturing survey fell to a reading of minus 1 in April, compared with a gain of 5.2 in April.

It came after weaker-than-expected US consumer inflation data for April on Friday diminished the view that the Federal Reserve would raise interest rates more than once for the rest of the year.

"We're being aided by the weaker empire number," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York. "Things have softened in the last few weeks."

The Consumer Price Index grew 2.2 percent on a 12-month basis through April, slower than March's 2.4 percent gain. This raised concerns the core rate of personal consumption expenditure would take longer than previously thought for inflation to reach the Fed's 2-percent goal.

Benchmark 10-year notes  were last down 2/32 in price to yield 2.34 percent, down from 2.35 percent before the data was released.

The yields fell to 2.32 percent overnight, aided by safety buying after North Korea fired a ballistic missile that landed in the sea near Russia on Sunday.

Futures traders have reduced expectations that the Fed will raise rates in June, though a rate increase that month is still viewed as likely.

Futures traders are pricing in a 69 percent chance of a June hike, down from 83 percent a week ago, according to the CME Group's FedWatch Tool.

The traders see only a 45 percent chance that two or more rate increases will be made by the Fed's December meeting, however, despite Fed officials repeating that they view two additional rate increases this year as likely.