NEW YORK: Prices for US Treasuries rose on Monday as investors, worried about weaker growth in the United States and China, turned to safe haven investments such as government debt.
The gains extended last week's rally, with benchmark yields touching the lowest in over a week.
US data on Monday showed the pace of growth in New York state manufacturing slowed more than expected in April, the latest disappointing data point for the world's biggest economy.
The decline in the New York Fed's "Empire State" general business conditions index "suggests that softer global economic outlook is starting to have an affect on US producers in the individual regions," said Amna Asaf, an economist with Capital Economics in Toronto.
China also posted weaker-than-expected data. The recovery in the world's second biggest economy unexpectedly stumbled in the first three months of 2013 with slowing factory output and investment spending forcing analysts to start slashing full-year forecasts despite official insistence the outlook was favorable.
"Today's disappointing data certainly put into question the strength of the Chinese recovery," Flemming J. Nielsen, a senior analyst with Danske Bank, said in a note.
The benchmark 10-year note rose 7/32 in price to yield 1.699 percent from 1.721 percent late Friday.
The 30-year bond last traded up 26/32 in price to yield 2.878 percent from 2.918 percent late Friday.
Also supportive for Treasuries were purchases by the Federal Reserve, which bought $5.6 billion in Treasuries maturing between January 2018 and December 2018. The purchases are part of the accommodative monetary policy the Fed hopes will foster economic growth and limit the negative impact of fiscal restraint.
In addition, the shaky data fueled an exodus from stocks, with major US indexes down 1 percent or more.
In contrast to stocks, however, most bond trading occurred in very narrow ranges.
"After last week's ride up and right back down again (in yields), there just wasn't anything on the calendar this morning to attract any commitments," said John Canavan, fixed income analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.
In the safe-haven universe, investors appeared to favor US Treasuries over gold. Gold dived more than 8 percent on Monday, dropping over $100 for its biggest one-day decline in dollar terms, as investors exited the precious metal in droves in search for better returns elsewhere.
"If Cyprus really does begin to sell its gold holdings, what about the other countries needing to raise cash?," said Quincy Krosby, market strategist at Prudential Financial in Newark, referring to a draft plan revealed last week for Cyprus to sell gold as part of its bailout. "Cyprus would be setting a precedent."
The gold sell-off "also fits with the low 10-year yield, suggesting more deflationary, rather than inflationary, environment," she said.
<Center><b><i>Copyright Reuters, 2013</b></i><br></center>
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