TREASURIES-Long maturities prices lifted by limp euro zone data

Mon Jun 23, 2014 2:48pm EDT

Related Topics

* Euro zone weakness seen dulling global growth
    * Traders shrug off U.S. factory, home sales data
    * Three-year, 5-year debt seen vulnerable to U.S. economic
gains

 (Adds late trading, strategist comments)
    By Michael Connor
    NEW YORK, June 23 (Reuters) - Prices of long maturity U.S.
Treasuries rose on Monday after business activity data showed
growth slowing in France and elsewhere in the euro zone.
    The gains, which left yields on benchmark 10-year Treasuries
well within a trading range in place since February, narrowed
when unexpectedly strong U.S. factory data was published but
mostly recovered in later New York trading.
    "Prices are up here mainly because some of the data we got
overnight and over the weekend were somewhat on the
disappointing side, most notably France," said Stan Shipley,
fixed income strategist at ISI Group in New York.
    The euro zone's flash composite purchasing managers' index
fell to 52.8 in June, below forecast, from 53.5 in May, data
provider Markit said.
    Germany, Europe's largest economy, was the driving force in
the composite index, although its PMI eased to 54.2 from 55.6.
The French index slumped to 48.0 from 49.3, its lowest reading
since February. 
    "If Europe cannot post acceptable GDP growth, then it's
unlikely that China and other parts of the world can be solid
too," Shipley said. "Then the U.S. looks more attractive."
    Earlier, during the Asian trading day, reports showed
manufacturing in China and Japan returning to growth in June
after months of decline.      
    Jim Vogel, interest rate strategist at FTN Financial,
described Treasuries trading as segmented. Buyers of longer
maturities eye global events rather than accumulating data
suggesting American economic growth is accelerating, he said.
    "We are not trading U.S. economic data today but we may do
so on a lag basis," Vogel said. "It will have a cumulative,
stronger effect as we get other, stronger data, particularly if
we continue to see some improvement in single-family real
estate. It would indicate that the household sector is alive and
kicking."
    U.S. data on Monday showed factory activity expanding
strongly in June, with financial data firm Markit's preliminary
manufacturing purchasing managers index at its highest level
since May 2010. A separate report had home resales higher than
forecast during May.
    Neither economic report much affected Treasuries trading,
Vogel said, adding that three-year and five-year Treasuries were
most sensitive to U.S. economic reports.
    In late trading, benchmark 10-year notes were up
6/32 to yield 2.6025 percent, versus 2.612 percent on Friday.
The 10-year notes yielded 3 percent at the beginning of 2014.
    Prices of 30-year Treasuries were up 17/32 to
yield 3.42 percent, down from Friday's 3.44 percent.
    Five-year Treasuries were up 1/32 in price to
yield 1.69 percent after yielding as little as 1.68 percent.
    "I think that's where you'd see the weakness occur first,
where as 10s and 30s have more of an international tone than the
shorter part of the curve," Vogel said.    

 (Editing by Bernadette Baum and Paul Simao)
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