TREASURIES-Yields rise from one-year lows
By Karen Brettell NEW YORK, June 2 (Reuters) - U.S. Treasuries yields rose on Monday, after falling to one-year lows last week, as investors were reluctant to buy bonds that offer low returns on expectations that yields will rise if the economy continues to gain momentum. Treasuries yields have fallen on expectations that the European Central Bank will cut interest rates and take other measures meant to stimulate growth when it meets on Thursday. But dovish central banks are also making investors bet that growth and inflation may accelerate, and that bond yields will need to rise in tandem. "People are thinking that maybe the data isn't going to be as bad and the ECB will do some kind of credibly dovish action on Thursday that will increase things like inflation expectations and growth expectations," said Ira Jersey, an interest rate strategist at Credit Suisse in New York. Benchmark 10-year notes fell 7/32 in price to yield 2.51 percent. The yields have risen from an 11-month low of 2.40 percent reached on Thursday, which is also a level that has technical resistance. Thirty-year bonds fell 19/32 in price to yield 3.36 percent, up from an 11-month low of 3.27 percent on Thursday. Treasuries typically move in correlation with German government bonds, which have rallied on expectations of more stimulus. Benchmark U.S. 10-year notes are also still relatively more attractive than the equivalent German bunds that pay more than a percentage point less in yield. Short covering by investors that had bet that stronger U.S. growth would send Treasuries yields higher has also helped U.S. bonds rally, though there are signs that many of these shorts have now been covered. Speculators' net bearish bets on U.S. 10-year Treasury note futures fell to their lowest in three months as the bond market rallied in May on worries about the U.S. economy, according to Commodity Futures Trading Commission data released on Friday. China's manufacturing activity expanded at the fastest pace in five months in May, data showed, reducing the safety demand for Treasuries. (Editing by Chizu Nomiyama)
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