LONDON, April 2 U.S. 10-year T-note yields fell to two-month lows on Tuesday as data showing a slowdown in U.S. manufacturing and worries about the wider impact of Cyprus's bailout deal kept low-risk assets in demand.
The Institute for Supply Management's gauge of manufacturing activity released on Monday showed that factory activity in the United States grew at the slowest rate in three months in March.
Cyprus detailed over the weekend losses of around 60 percent for savers of more than 100,000 euros as part of a bailout agreed just over a week ago. The deal was the first in euro zone history to make bank depositors share the burden and raised concerns it could be used as a model for solving other crises.
U.S. 10-year T-note yields were last 0.3 basis points lower at 1.8314 percent, having hit a two-month low of 1.823 percent earlier in the session. T-note futures were 3/32 higher at 132-07/32.
"The market still wants to be bought here ... 1.80 percent is the target," one trader said. "Of course the non-farm payrolls (data on Friday) is the wild card. If it comes softer we could test 1.75 percent."
The economic impact from $85 billion in automatic federal spending cuts that began on March 1 could start appearing in economic data soon and lend support to Treasuries this quarter, said Tomoaki Shishido, rate analyst for Nomura Securities in Tokyo.
Given such an outlook, the 10-year yield may initially head lower in the current April-June period, said Shishido, who is expecting a 1.7 percent to 2.1 percent range for this quarter.
The 10-year yield could rebound later on, however, if U.S. lawmakers were to decide to retroactively cancel the spending cuts in coming months, he said.