LONDON: US Treasury prices pushed higher on Wednesday after a survey showed that China's services sector weakened sharply last month, reinforcing investor concerns about global economic growth.
Concerns about when Spain would activate European Central Bank bond purchases to lower its borrowing costs also propped up Treasuries but activity was light before US ADP private sector jobs data later in the day, seen as a guide to Friday's non-farm payrolls report.
Ten-year notes were last up 2/32 in price to yield roughly 1.61 percent, down 1 basis point from late US trade on Tuesday.
China's official purchasing managers' index for the services sector fell to 53.7 in September, the lowest point since November 2010, according to the latest survey from the National Bureau of Statistics.
"Everyone is forecasting slower growth in China and the data was one of the reasons why equity markets were hit early and (Treasuries) were higher," a trader said.
"But we're going to need a new catalyst in order to breach resistance levels around 1.60 percent in 10-year T-note (yields) and I don't see what it could be before ADP," he said.
The ADP report, due at 1215 GMT, could trigger a move lower in benchmark Treasury yields if it undershoots expectations that private employers created 143,000 jobs in September and prompt downward revisions for Friday's non-farm payrolls.
"If that's the case that would be enough for 10s to break through resistance, but before that we'll have a tough time to sustain these gains before New York comes in," the trader said.
However, some strategists such as Intesa SanPaolo's Sergion Capaldi were cautiously optimistic that the ADP figures could beat market consensus, predicting that 160,000-170,000 jobs were probably added to the economy last month.
"The macro data that we should see today should point towards a more upbeat scenario and that would be positive for the stock market and a little negative for Treasuries," Capaldi said. "We're not expecting a quantum leap in the macro data but stabilisation, and this should give the 10-year yield a mild jump to 1.68-1.70 percent."
The 10-year Treasury yield had hit a four-month high of 1.894 percent in mid-September, as inflation expectations and shares rose after the Fed unveiled an open-ended programme to buy $40 billion in mortgage-backed securities each month.
Such gains have since faded, however, and the 10-year yield is now down about 29 basis points from that peak.
Friday's payrolls report is expected to show that employers added 113,000 jobs in September, compared with 96,000 in August. Economists also expect that data on Friday will show that the US unemployment rate ticked up in the month to 8.2 percent, from 8.1 percent in August.
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