* Traders eye Thursday's ECB meeting
* U.S. manufacturing, construction spending strong
By Sam Forgione
NEW YORK, Sept 2 U.S. Treasuries yields rose on
Tuesday after traders took profits on uncertainty ahead of a
highly anticipated European Central Bank meeting this week.
Traders reevaluated expectations that the ECB might embark
on new quantitative easing to ward off deflation at Thursday's
meeting. Doubts as to the ECB's plans drove German government
bond and Treasuries yields higher.
"It could be those expectations were getting a little bit
lofty," said Stanley Sun, interest rate strategist at Nomura
Securities International in New York, citing the expectations
for more ECB stimulus. "I wouldn't be surprised if we get more
volatility heading into Thursday."
German Bund yields plunged to record lows last week, pulling
Treasuries yields lower with them, following comments from ECB
President Mario Draghi at a central bank symposium in Jackson
Hole, Wyoming hinting at the potential for more stimulus.
The uncertainty led traders to take some profits on
Treasuries. U.S. Treasuries yields remained high following
strong data on U.S. manufacturing and construction spending.
Financial data firm Markit said its final U.S. Manufacturing
Purchasing Managers Index rose to 57.9 in August from 55.8 in
July, marking its highest level since April 2010. The Institute
for Supply Management said its index of national factory
activity rose to 59.0, marking its highest level since March
U.S. construction spending rose 1.8 percent in July,
according to the Commerce Department. That topped expectations
for a 1.0 percent increase, according to a Reuters poll.
"Any positive news on the economy tends to be a foregone
conclusion," Sharon Stark, chief fixed income strategist at D.A.
Davidson in St. Petersburg, Florida, said of the small impact of
the data on Treasuries yields. "The market is really focused on
U.S 10-year Treasury notes were last down 19/32
in price to yield 2.41 percent, up from a yield of 2.35 percent
late Friday. Thirty-year Treasury bonds were last
down 1-13/32 in price to yield 3.16 percent, up from 3.09
percent late on Friday.
In addition to the ECB meeting, traders are looking ahead to
Friday's U.S. employment data, which could affect views on when
the Federal Reserve will hike interest rates. That led traders
to take some profits from last week's higher prices and drop in
The Fed "might tweak their wording to prepare the market for
an eventual rate hike" if the jobs number comes in better than
expected, said Nomura's Sun. U.S. employers are expected to have
added 225,000 jobs in August, according to a Reuters poll.
(Reporting by Sam Forgione; Editing by Dan Grebler)