Treasurys edge lower after strong economic reports

AP News
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Posted: Mar 05, 2012 4:23 PM
Treasurys edge lower after strong economic reports

U.S. Treasury prices fell Monday after a pair of solid economic reports overshadowed fears about China's slowing economy.

The nation's service companies expanded in February at the fastest pace in a year, the Institute for Supply Management said Monday morning. The ISM, a trade group of purchasing managers, said its index of non-manufacturing activity rose for a third straight month, helped by strong new orders and hiring.

A separate report showed that orders to U.S. factories declined in January far less than economists had expected. Economists surveyed by FactSet expected orders to plunge 1.5 percent because a key tax credit had expired on Dec. 31. The actual decline was only 1 percent. The result appeared in line with the longer-term upward trend for factory orders, several economists said.

The reports boosted confidence in the pace of economic recovery, reducing demand for ultra-safe Treasurys.

The yield on the 10-year Treasury note rose to 2.01 percent late Monday from 1.99 percent late Friday. Its price fell 25 cents for every $100 invested.

A bond's yield rises as its price falls. That means traders are demanding a slightly higher return on the bonds in exchange for holding what are widely considered to be safe investments.

Treasurys had risen overnight after China lowered its economic growth target to 7.5 percent from the 8 percent level it stood at for years. China's white-hot growth has helped sustain the world economy through the downturn that started in 2008. Slower growth in China could hinder the global recovery.

Concerns about China caused traders to buy Treasurys, pushing the yield on the 10-year Treasury note as low as 1.96 percent early Monday morning.

The yield on the 30-year Treasury bond rose to 3.15 percent from 3.12 percent late Friday. Its price fell 81 cents per $100 invested.

The yield on the two-year Treasury note rose to 0.30 percent from 0.28 percent late Friday. The three-month Treasury bill paid a yield of 0.06 percent, unchanged from late Friday.