US bond prices idle as investors watch stocks

NEW YORK: US Treasuries prices were little changed on Monday as investors sought direction from stocks about a return of market confidence after a volatile week that whipsawed equity prices and sent buyers scurrying to US government debt.

Prices gained slightly after weak August manufacturing data from New York State reinforced concerns over the slowing US economy.

"I think the bond market's going to take their lead from the equity market," said Charles Comiskey, head of Treasury trading at Bank of Nova Scotia in New York.

"If equities continue to perform poorly, I think it will drive more fear into the marketplace here, and you'll see it reflected in yields," he said.

Benchmark 10-year notes were last unchanged in price to yield 2.26 percent. They earlier fell to 2.25 percent after a gauge of manufacturing in New York State showed the sector contracted for the third month in a row in August.

The note's yields last week plunged 30 basis points after the Federal Reserve said it would keep rates steady for at least two more years, leading more investors to seek out longer dated debt to generate returns.

"The front end is pretty much locked in. With the Fed statement last week the volatility in the front end is going to drop off the table," Comiskey said.

Now, "the action's going to be in the 7s, 10s and 30s."

Seven-year notes were unchanged in price to yield 1.56 percent.

Thirty-year bonds, which are most volatile and sensitive to US fiscal health, fell 13/32 in price to yield 3.75 percent, up from 3.73 percent on Friday.

Copyright Reuters, 2011