June 4, 2014 / 6:50 PM / in 4 years

TREASURIES-Yields edge higher before ECB, after mixed U.S. data

(Adds details on Beige Book, updates prices)
    * 10-yr yields over 2.60 pct, investors take profits before
    * Strong services data overturns weak jobs report
    * U.S. payrolls report on Friday also in focus
    * Fed buys $1.03 bln bonds due 2039-2043

    By Karen Brettell
    NEW YORK, June 4 (Reuters) - U.S. Treasuries yields edged up
on Wednesday as investors took profits from the recent rally,
before Thursday's highly anticipated European Central Bank
    The ECB is expected to cut interest rates and announce other
measures to help stimulate growth in the region. 
    Bonds rallied in May, in part in anticipation of the ECB's
actions. But yields have risen back from 11-month lows reached
on Thursday as investors take profits.
    "A lot of the ECB has been priced in and you see some profit
taking ahead of them," said Sean Murphy, a Treasuries trader at
Societe Generale in New York.
    The ECB meeting also comes before Friday's U.S. employment
report for May, which could mark a volatile two days of trading.
    Benchmark 10-year note yields rose above a
technical support level of 2.60 percent on Wednesday, and are up
from 2.40 percent last week.
    Disappointment at the ECB's announcement on Thursday or a
stronger than expected jobs figure on Friday could push the
notes' year note yields more firmly back into the range of 2.60
percent to 2.80 percent, where they had traded from late January
until May.
    "Everyone's focused on the ECB and they do have a history of
underwhelming the market when it comes to actually delivering
changes on monetary policy," said Ian Lyngen, a senior
government bond strategist at CRT Capital in Stamford,
    Treasuries erased earlier price gains on Wednesday after
strong U.S. services sector data overcame weaker than expected
private sector jobs gains to show solid economic growth.
    Growth in the U.S. services sector accelerated in May,
rising at the fastest pace in nine months as new orders and
business activity jumped. 
    The data came after a report by a payrolls processor showed
that U.S. companies hired 179,000 workers in May, marking the
lowest monthly increase since January and falling short of
market expectations.
    The U.S. trade deficit also widened to its highest level in
two years in April as imports hit a record high, suggesting
trade could be a drag on second-quarter growth. 
    Economic growth strengthened throughout the country with a
broad pick-up in manufacturing, "brisk growth" at some shipping
ports and steady consumer spending, the Federal Reserve said on
Wednesday in its Beige Book of anecdotal economic reports from
around the country. 
    The Fed bought $1.03 billion in bonds due from 2039 to 2043
on Wednesday as part of its ongoing purchase program.

 (Editing by Meredith Mazzilli and Nick Zieminski)
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