US Treasury prices gained on Tuesday after weak regional manufacturing data raised some concerns about the economy and as month-end repositioning boosted demand for the debt. A Chicago manufacturing index was the lowest in more than two years and came in far below expectations.
"The Chicago purchasing managers survey really disappointed, and that's what really put the bid into the market," said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle. It followed weak data overnight in China that sent bond prices higher.
Better-than-expected euro zone economic growth temporarily erased this strength.
Investors rebalancing their books for month end and before Wednesday's Federal Reserve meeting added to strength.
"You have month-end position squaring going on, and I think people are also squaring their books as they're getting ready for the Fed" on Wednesday, Hurley said.
Fed Chairman Jerome Powell will give a news conference on Wednesday. Traders will be looking for indications on how the US central bank views market pricing of further rate moves.
Interest rate futures traders are currently pricing in a 66 percent chance of an interest rate cut by December, according to the CME Group's FedWatch Tool.
The Treasury Department will announce its refunding plans for the coming quarter on Wednesday. It said on Monday it plans to borrow much less in the second quarter than it previously expected. Treasury said it will borrow $30 billion during the April-June period, less than half its previous estimate.
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