Treasuries decline

US Treasuries prices fell on Monday as investors turned to stocks and a surprisingly big pickup in consumer spending soothed fears that the United States could fall back into recession. A merger between two big Greek banks generated optimism that Europe is working through its debt problems, helping to pare the safe-haven demand for US government debt, traders and investors said.
"We are basically reacting to stocks and the higher spending in the personal income numbers," said Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co in Seattle. Bond trading was choppy in light volume after a powerful storm pounded the US East Coast over the weekend. Heavy flooding and disruptions to commuter lines prevented some traders from reaching their offices, although the damage from Hurricane Irene was less than some had feared.
Treasuries volume was roughly half its normal daily average as of mid-afternoon on Monday, according to bond broker ICAP. A 0.8 percent rise in consumer spending in July, the biggest gain in five months, reported on Monday, provided a ray of hope on the economy's path after a slew of recent reports that had signalled a sharp slowdown.
"The economy is continuing to grow softly. The numbers on personal income and spending were surprisingly good. Consumers are holding up," said Richard Schlanger, portfolio manager at Pioneer Investments USA in Boston, which manages about $260 billion in assets world-wide. The spending figures helped lift Wall Street stocks by over two percent.
"If anybody was concerned about this recession risk people were talking about, this personal spending number seems to be another point against that recession argument. It seems, at least through July, the economy was not too poor," said Jeffrey Greenberg, economist with Nomura Securities International in New York.
Benchmark 10-year Treasury notes traded 23/32 lower in price to yield 2.28 percent, up 9 basis points from late Friday, while the 30-year bond was down 1-20/32 for a yield of 3.62 percent, up 8 basis points from Friday. In the relatively quiet trade, the European debt crisis regained a bit of the focus of traders. A merger between Greece's Alpha and EFG Eurobank, with the help of Qatar, is expected to trigger more deals to shore up the European banking system, which has been hurt by the region's sovereign debt crisis.
In other US data on Monday, the National Association of Realtors said the number of signed contracts for the purchase of existing homes fell 1.3 percent in July, matching analysts' expectations.
The big data point of the week will come on Friday when the government releases non-farm payrolls numbers from August. The median of forecasts from analysts polled by Reuters was for employers to have added 75,000 jobs this month, down from 117,000 in July. The unemployment rate is expected to have remained unchanged from July at 9.1 percent.