* ISM services data best since 2005
* 10-year yields top 2.5 percent
By Michael Connor
NEW YORK, Aug 5 Treasuries prices slumped on
Tuesday after industry data signaled that the U.S. services
sector grew last month at its fastest pace since 2005.
Yields on the benchmark 10-year note topped 2.50
percent after the Institute for Supply Management report.
The data encourages speculation that Federal Reserve
policymakers will start raising historically low interest rates
sooner than widely expected.
The institute said its services index rose to 58.7 last
month, the highest since December 2005, from 56.0 in June. The
reading blew past economists' forecasts of a 56.3 reading,
according to a Reuters survey.
The 30-year Treasury bond was down 16/32 in
price to yield 3.32 percent, versus 3.29 percent at Monday's
Ten-year notes were last down 9/32 in price to yield 2.52
percent, up from 2.49 percent at Monday's close.
Treasury yields also got a lift from some investors
unwinding defensive holdings amid stock market gains on Wall
Street on Monday and in Europe on Tuesday.
"It's a reaction to how stock markets are doing a little
better; they have stabilized a bit," said Steve Van Order, fixed
income strategist with Calvert Investments in Bethesda,
Maryland. "That flight to quality is getting unwound down the
Early on Tuesday, however, U.S. stock markets were lower
even after European equities rose on better-than-forecast
Among intermediate maturities, the 7-year note
was off 6/32 and yielding 2.17 percent versus 2.14 percent at
the close on Monday.
Yield differences between 2-year and 30-year Treasuries have
been shrinking, with some demand shifting away from the long
bond to 2-year and other shorter and intermediate maturities,
Van Order said.
"We will continue to see pressure on the shorter
maturities," Van Order said. "We think there will be some
pushing and shoving in that part of the curve as the months go
by to when the Fed moves to liftoff."
(Reporting by Michael Connor in New York; Editing by Dan