AP News

Treasurys trim losses after weak factory survey


Treasurys cut early losses Tuesday after a weak report on manufacturers raised hopes of more bond buying by the Federal Reserve to stimulate the economy.

The price of the benchmark 10-year Treasury note fell 21.9 cents for every $100 invested. The higher price pushed the yield up to 1.58 percent from 1.56 percent late Friday. The bond market was closed Monday for Labor Day.

The Institute for Supply Management reported Tuesday that U.S. manufacturing contracted in August for the third straight month. Investors are hoping signs of a weaker economy will prod the Federal Reserve to launch a third round of Treasury bond buying at its meeting next week.

The price of 30-year Treasury bonds fell 15.6 cents for every $100 invested. The yield rose to 2.68 percent from 2.67 percent.

In addition to the factory report, the Commerce Department reported Tuesday that construction spending fell 0.9 percent in July from June. That was the sharpest decline in a year.

The next few days could be rocky for investors. On Thursday, the European Central Bank meets to discuss plans to keep the 17-country euro bloc intact. Investors are expecting the bank will announce plans to buy bonds of struggling countries like Spain in an effort to keep their borrowing costs low.

On Friday, the U.S. government releases its employment report for August. In a speech Friday in Jackson Hole, Wyo., Fed Chairman Ben Bernanke said that high U.S. unemployment was a "grave concern" and that the Fed was ready to take more action if the economy didn't improve.

The unemployment rate has been above 8 percent for the past 3½ years. It currently stands at 8.3 percent.

In other bond trading, the yield on the five-year note rose to 0.62 percent from 0.59 percent. The yield on the two-year note rose to 0.24 percent from 0.22 percent.

The yield on the three-month T-bill was unchanged at 0.09 percent.


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