* ISM says factory activity slowed in March
* S&P, Dow below all-time closing highs
* U.S. payrolls report, due Friday, to be key influence
By Ellen Freilich
NEW YORK, April 1 Prices for U.S. Treasuries
rose on Monday, building on three straight weekly gains, after
data showed U.S. manufacturing growth slowed in March, feeding
worries about the strength of the recovery in the world's
The Institute for Supply Management said on Monday its index
of national factory activity fell to 51.3 last month, from 54.2
in February. A reading above 50 indicates expansion in the
manufacturing sector. New orders, a key indicator of future
growth, accounted for much of the drop in the index.
"The weaker than expected ISM manufacturing report was
really the big bullish trigger for today's session," said Ian
Lyngen, a senior government bond strategist at CRT Capital Group
in Stamford, Connecticut.
Stocks pulled back from record highs in the wake of the
data, and prices for Treasuries reversed early losses to
"Since manufacturing has been a bright spot in the economy
lately, the weaker-than-expected reading had an outsized effect
on the market," said Thomas Simons, vice president and money
market economist at Jefferies & Co in New York.
Trading resumed on Monday after an early close on Thursday
and a closure on Friday for the Good Friday holiday in the
United States. Trading on Monday was subdued, with markets in
most of Europe shut for Easter Monday.
Ten-year Treasuries, in the minus column before the ISM
manufacturing report came out, moved into the plus column
afterwards and last traded up 4/32, yielding 1.838 percent, down
slightly from 1.85 percent late on Thursday.
The market has a full plate of economic data to absorb this
week: The last three days of the trading week each feature a
report on the labor market, starting with the ADP employment
report on Wednesday, the latest weekly jobless claims figures on
Thursday, and the highly influential non-farm payrolls report
from the U.S. Labor Department on Friday.
The latter will be closely scrutinized for signs of further
improvement in hiring. The report is expected to show that
200,000 jobs were added in March, according to the median
estimate of economists polled by Reuters.
TREASURIES END Q1 SLIGHTLY WEAKER
Treasuries ended the first quarter only slightly weaker
after bailout squabbles for euro zone member Cyprus saw
investors scoop up safe havens, erasing most of the losses of
January and February, when investors bet on a strengthening U.S.
Benchmark 10-year Treasuries yields reached near three-week
lows by the end of last week on fear that the Cypriot bailout
deal, inflicting losses on bondholders and bank depositors,
could be replicated elsewhere in the monetary union.
Barclays' total return index on U.S. Treasuries fell 0.13
percent in the first three months of 2013, after a 0.09 percent
decline in the fourth quarter of last year.
Market participants still expect yields to gradually edge
higher as the U.S. economy continues to strengthen.
Near-term, however, yields could slip, said William
O'Donnell, head of U.S. Treasury strategy at RBS Securities in
"We continue to see a 1.72 percent to 2.15 percent range for
10-year yields, perhaps persisting through the second quarter,"
he said. "Key support remains 2.15 percent while near term
resistance is around 1.83 percent.
"Our bias remains toward modestly lower yields near-term
because positioning is favorable and medium-term charts are
turning bullish for the first time since early December,"