Prices rise in early trading

NEW YORK: The prices of US Treasuries rose ahead of the release of key US manufacturing data, but trading volume was light, analysts said.

Lower commodity prices also helped drive the moderate bid for Treasuries, but traders were mostly waiting for the Institute for Supply Management's June manufacturing reading, which would either confirm a slowdown in manufacturing activity or offer a strong new source of hope for continuing economic recovery.

A slowdown in manufacturing would be good for bonds, but regional US manufacturing measures have shown a mix of weakness and surprising strength, making the ISM nation-wide numbers hard to predict. Globally, however, manufacturing activity has slowed.

Of the 20 countries that have released June data so far, 16 declined month-over-month, a Bank of America Merrill Lynch note said on Friday. China's factory activity hit a 28-month low, according to data released late on Thursday.

"I think that we're just a little bit better on the falling of Chinese PMI, risk assets are taking a minor, minor setback here," said John Briggs, interest-rate strategist at RBS Securities in Stamford, Connecticut.

"Commodities are down. We're really, more than anything, waiting for the 10 o'clock data to see if the manufacturing slowdown is confirmed."

Analysts polled by Reuters are expecting the ISM manufacturing index for June to register at 51.8 -- the lowest in nearly two years -- compared to May's 53.5 reading.

Benchmark 10-year Treasury notes rose 4/32 in price to yield 3.15 percent, down from Thursday's close at 3.17 percent. The 30-year bond was up 5/32, its yield falling to 4.36 percent from 4.38 percent late on Thursday.

Five-year Treasury notes rose 3/32 in price for a yield of 1.76 percent, down from 1.78 percent late on Thursday.

Copyright Reuters, 2011