TREASURIES-Long-dated Treasuries yields edge higher on U.S. data

Tue Apr 1, 2014 3:33pm EDT

Related Topics

* ISM data shows factory activity rose in March

* Intermediate-dated yields stable on Yellen comments

* Traders eye Friday U.S. jobs report (Updates prices, adds analyst comments, Fed purchases)

By Sam Forgione

NEW YORK, April 1 (Reuters) - Longer-term U.S. Treasuries yields rose on Tuesday following upbeat U.S. manufacturing data, while medium-term yields held steady after Federal Reserve Chair Janet Yellen's recent comments defending the Fed's easy monetary policy.

The Institute for Supply Management said its index of national factory activity rose to 53.7 in March. While that was below economists' median forecast of 54.0, it still marked a second straight month of accelerated growth.

"The data, in general, is showing a slightly less negative tone," said Aaron Kohli, an interest rate strategist at BNP Paribas in New York. Frigid temperatures hurt U.S. economic data at the start of the year.

The upbeat manufacturing data pushed longer-dated yields higher, Kohli said. Longer-term Treasuries bonds tend to decline in price in reaction to positive economic data, which signal stronger growth and inflation, which erode the value of longer-dated debt more than short-dated issues.

The 30-year Treasury bond price fell 24/32 to yield 3.6 percent, compared with a yield of 3.56 percent late Monday. The benchmark 10-year U.S. Treasury note eased 9/32 in price to yield 2.76 percent, compared with a yield of 2.72 percent late Monday.

Meanwhile, short- and intermediate-dated Treasuries notes were roughly unchanged after Yellen's comments on Monday were perceived as more dovish than earlier remarks.

Yellen gave a strong defense of the Fed's easy-money policies in a speech to a community investment conference in Chicago Monday, offsetting comments perceived as more hawkish at a March 19 press conference.

The March 19 comments, which included a suggestion that the Fed could raise interest rates earlier than expected, triggered a selloff in Treasuries, especially short- and intermediate-dated notes.

Yellen's comments bolstered traders' risk appetite, which has resulted in selling pressure on longer-dated Treasuries and stability in short- and intermediate-term Treasuries yields, said Shyam Rajan, U.S. rates strategist at Bank of America Merrill Lynch in New York.

The five-year Treasury note was roughly unchanged in price to yield 1.74 percent, compared to a yield of 1.73 percent late Monday. The 2-year Treasury note last traded roughly flat on the day with a yield of 0.43 percent.

Traders also awaited Friday's U.S. employment report for March, which could be strong and spur more selling of longer-dated Treasuries. Employers are expected to have added 195,000 jobs in March, according to the median estimate of economists polled by Reuters, up from 175,000 in February.

"People would rather wait before Friday's release of payrolls before initiating a large position," said Rajan of Bank of America Merrill Lynch, in reference to the limited moves in Treasuries yields on Tuesday.

The Fed bought $1.02 billion in Treasuries maturing between Feb. 2036 and Feb. 2043 on Tuesday as part of its ongoing purchase program, which had a little effect on Treasuries yields.

On Wall Street, all three major stock indexes were higher, with the Standard & Poor's 500 advancing to an intraday record and last up 0.52 percent after the release of the ISM data. (Reporting by Sam Forgione; Editing by James Dalgleish and Diane Craft)

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