NEW YORK: US Treasury debt prices rose on Tuesday, with benchmark yields touching near one-month lows after data showed that US factory activity fell in November to the lowest level in six years.
Purchases of longer-dated Treasuries to meet expected month- and year-end changes to portfolio benchmarks pushed longer-dated bond prices slightly higher, further flattening the yield curve, analysts said. Longer-dated yields could continue to outperform once the Fed raises rates, as expected, in anticipation of higher rates and still low inflation.
The Institute for Supply Management's gauge on US services industries was the weakest since June 2009 and pushed yields maturing between two- and 30-years to session lows.
US benchmark 10-year Treasury notes were last up 16/32 in price to yield 2.161 percent, down sharply from a yield of 2.218 percent on late Monday. The 10-year yield hit a near one-month low of 2.159 percent in the wake of the US manufacturing data, which came in below expectations.
The US 30-year bond yield also touched a near one-month low of 2.927 percent. US 30-year Treasury bonds were last up 1-6/32 in price to yield 2.930 percent, down from a yield of 2.990 percent late Monday.
"The data has been skewed to the positive side. The market has priced in a December increase and is waiting for comments from Fed speakers this week," said Bruno Braizinha, interest rates strategist at SG Corporate & Investment Banking in New York.
Economists expected the ISM reading to come in at 50.5 percent, but it slid to 48.6 just a day after weaker-than-expected data indicated a contraction in the Midwest factory sector. A reading of 50 means the sector is expanding.
Still, economists expect Friday's closely-watched employment report to show employers added 200,000 jobs in November, according to a Reuters poll.
Evidence of further improvement in the US labor market, viewed by many as a key data indicator, would reinforce expectations that the Federal Reserve will raise interest rates this month.
Traders will be listening to speeches from top Fed officials this week for clues and details about the possible rate increase. Federal Reserve Bank of Chicago President Charles Evans and Federal Reserve Board Governor Lael Brainard will be speaking at separate events on Tuesday.
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