Data suggesting the US economy was picking up steam nudged US government bond prices lower on Monday, though recession fears in Europe and slower growth in China kept losses in check. Anxiety about Greece's debt swap deal ahead of Thursday's participation deadline also persuaded investors not to stray too far from the safety of the massive US Treasury market.
Without the deal, Greece would likely default on its outstanding debt. But data from the Institute for Supply Management showing that the vast US services sector grew last month at its fastest clip in a year put a dent in the safety bid for Treasuries. In a familiar trading pattern, the yield on benchmark 10-year Treasury notes initially edged up to 2.01 percent, from 1.98 percent Friday, but retreated to 2 percent by late afternoon. The note was last down 5/32 in price.
Thirty-year Treasury bonds were trading 17/32 lower in price to yield 3.14 percent, from 3.11 percent Friday. "That's been the story for some time now," said Kim Rupert, managing director of global fixed income analysts at Action Economics in San Francisco. "Yes, there are signs of stronger US growth. But there are so many headwinds constraining sentiment and keeping the market in a very tight range."
If US data continues to improve, bond yields could start to back up slowly, analysts said, though most added it would take time to break out of the current range. The government will release its monthly jobs report on Friday. Economists polled by Reuters expect employers added 210,000 new jobs in February after January's 243,000 tally.
"We head into this week in the middle of the recent range, but with renewed conviction that a break higher in yields is possible," said George Goncalves, head of US interest rates strategy at Nomura Securities International in New York. The Fed on Monday sold $1.33 billion of Treasury inflation-protected securities maturing July 2012 through January 2015, as part of its latest economic stimulus program which the financial community has dubbed "Operation Twist.
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