LONDON Feb 5 U.S. government bond prices dipped
on Tuesday in European trade after a survey of business activity
in the euro zone exceeded expectations, denting demand for
assets perceived as safe havens.
Markit's Eurozone Composite PMI, seen as a good gauge of
economic growth, rose in January to a 10-month high of 48.6 from
47.2 in December - an improvement on the preliminary reading of
The data brought back some optimism about the euro zone
after the region's lower-rated states were hit by worries over
their political stability on Monday.
In Spain, the opposition asked Prime Minister Mariano Rajoy
to resign over a corruption scandal, while in Italy former
premier Silvio Berlusconi - a pariah for many investors - is
gaining in opinion polls.
Benchmark 10-year T-note yields were 2.5 basis
points higher at 1.9818 percent. On Monday, the yields hit their
highest since April last year at 2.059 percent before dipping
back below 2 percent.
T-note futures were 3/32 lower on the day at
"PMI numbers came out a bit better than expected and that
set the tone," one trader said, adding that even better data was
needed to sustainably break above the 2 percent level.
The ISM non-manufacturing PMI data later in the session will
be watched for further evidence that the U.S. economy is
recovering after a raft of mostly upbeat data earlier this year.
The recent economic improvement is not considered enough to
sway the Federal Reserve to change its stimulus policy any time
soon. The Fed on Monday bought $3.23 billion in Treasuries that
mature between February 2020 and November 2022, as part of its
$44 billion purchase of Treasuries in February.
That, coupled with the absence of new long-term debt supply
from the U.S. Treasury this week, "took the sting out" of
T-notes, the trader said.