TREASURIES-Yields lowest since November on weak manufacturing data
* Ten-year yields fall below 2.60 pct, lowest since Nov. 1 * Fed buys $1.25 bln bonds due 2038-2043 * Fed on Tuesday to buy $2.25 bln-$2.75 bln notes By Karen Brettell NEW YORK, Feb 3 (Reuters) - U.S. Treasuries yields fell to their lowest levels since the beginning of November on Monday after a report showed that U.S. manufacturing grew at a substantially slower pace in January. New order growth plunged by the most in 33 years, driving overall factory activity to an eight-month low, according to the Institute of Supply Management's index. The report drove Treasuries prices back into positive territory after the bonds had weakened earlier on solid European growth and some calming in emerging market assets. "Overall this is a weak number and it does suggest some dramatic slowing in economic activity," said Millan Mulraine, deputy head of U.S. research and strategy at TD Securities in New York. "One can put most of this down to the unseasonably cold weather that we've had over the past two months, we've seen that in other economic reports. The big question is whether that proves to be temporary, and we think that it will," he said. Continuing bad weather in the United States is threatening also to upset Friday's highly anticipated jobs report for January, after harsh weather was blamed for December's jobs gains coming in well below expectations. Employers are expected to have added 185,000 jobs in January, according to the median estimate of 101 economists polled by Reuters. The Federal Reserve is not due to meet again until March, which will give it time to evaluate more data before deciding if it should continue paring its bond purchases. Last week, in the last policy meeting headed by Ben Bernanke, it cut its monthly bond purchases by $10 billion, to $65 billion. Benchmark 10-year Treasuries yields have fallen by almost half a percentage point since the beginning of the year as economic data weakens. A rout in emerging market assets that some blame on the Fed's paring bond purchases has also led investors to seek out the safe-haven U.S. bonds. The Treasuries rally has been helped by purchases as investors rebalance portfolios for month-end and by short-covering by investors who had positioned for higher yields. Some of that buying may now ebb as shorts are covered, though it may depend if 10-year note yields are able to hold below the 2.60 percent area, where there has been technical resistance. "This is kind of a wash-out of peoples positions, it probably has been building over the course of the last month and now we're getting capitulation," said Tom Tucci, head of Treasuries trading at CIBC in New York. The 10-year note yields fell as low as 2.582 percent on Monday, the lowest since Nov. 1. They are down from 3.04 percent on Jan 1. The Fed will buy Treasuries every day this week as part of its ongoing purchases, including two separate operations on Wednesday. On Monday the Fed bought $1.25 billion in bonds due 2038 and 2043. On Tuesday, it will buy between $2.25 billion and $2.75 billion in note due 2021 to 2023.
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