* Traders eye Thursday's ECB meeting
* U.S. manufacturing, construction spending strong
* Traders eye Friday U.S. nonfarm payrolls
(Updates prices, adds comments)
By Sam Forgione
NEW YORK, Sept 2 U.S. Treasuries yields rose on
Tuesday after uncertainty as to whether the European Central
Bank would announce more stimulus measures at a meeting this
week led traders to take profits from last month's rally.
Traders reevaluated expectations that the ECB, in an effort
to ward off deflation, might embark on purchases of asset-backed
securities. Doubts as to whether the ECB will hint at any
further action at its Thursday meeting drove German government
bond and Treasuries yields higher.
"There is a little bit more of a reality check of what that
actually would look like, how you would implement it, and then
down the road how you would exit from that," said George Rusnak,
managing director of global fixed income for Wells Fargo Private
Bank in Princeton, New Jersey, in reference to the potential ECB
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.
Analysts said strong U.S. manufacturing and construction
spending data reinforced the selling pressure on safe-haven
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.
"This is the first look for August data, and it's pretty
positive," said Priya Misra, head of U.S. rates strategy at Bank
of America Merrill Lynch in New York. "It does create a little
more confidence in the economy."
U.S 10-year Treasury notes were last down 20/32
in price to yield 2.42 percent, up from a yield of 2.35 percent
late Friday. Thirty-year Treasury bonds were last
down 1-18/32 in price to yield 3.17 percent, up from 3.09
percent late on Friday.
The profit-taking, particularly on longer-dated Treasuries,
followed a rally in August. The Barclays U.S. Treasury: 25
plus-year index, which has outperformed shorter-dated Treasuries
this year, gained 4.4 percent, marking its best month since
In addition to the ECB meeting, analysts said traders were
looking ahead to Friday's U.S. employment data. U.S. employers
are expected to have added 225,000 jobs in August, according to
a Reuters poll, a strong figure which could push forward
expectations for the first Fed rate hike.
A strong nonfarm payrolls figure could increase the chance
of a Fed rate hike in the first quarter of 2015, said Rusnak of
(Reporting by Sam Forgione; Editing by Dan Grebler and Chizu