SINGAPORE, April 2 The U.S. 10-year Treasury
yield hit a two-month low in Asia on Tuesday, after data
overnight showed a slowing in U.S. manufacturing growth,
stirring concerns about its economic outlook.
* Ten-year notes rose about 2/32 in price to yield 1.826
percent. Earlier, the 10-year yield slipped to a low
near 1.823 percent, its lowest level since Jan. 24.
* The 10-year Treasury yield has declined after the
Institute for Supply Management's gauge of manufacturing
activity released on Monday showed that U.S. factory activity
grew at the slowest rate in three months in March.
* The economic impact from $85 billion in automatic federal
spending cuts that began kicking in on March 1 could start
appearing in economic data for May and perhaps even in
indicators for April and lend support to Treasuries this
quarter, said Tomoaki Shishido, rate analyst for Nomura
Securities in Tokyo.
Given such an outlook, the 10-year yield may initially head
lower in the current April-June period, said Shishido, who is
expecting a 1.7 percent to 2.1 percent range for this quarter.
The 10-year yield could rebound later on, however, if U.S.
lawmakers were to decide to retroactively cancel the $85 billion
in spending cuts in coming months, he said.
"If that were to occur before the end of June, the 10-year
yield might then rise to levels exceeding their levels at the
start of this quarter," Shishido said.
Still, one factor that suggests that Treasuries could be
vulnerable even in the next week or two is market positioning,
Shishido said, adding that were signs that speculators had
increased their long positions recently on the back of concerns
"I think there will be selling (in Treasuries) if economic
data comes in strong and the situation in Europe doesn't
worsen," Shishido said.
Investor worries that the rescue deal for Cyprus that
inflicts losses on bank depositors could be replicated elsewhere
in the euro zone, have helped Treasuries rally over the past
couple of weeks.
More U.S. economic indicators are on the way this week,
including data on factory orders later on Tuesday and jobs data