US Treasury debt prices turned positive on Thursday after the Philadelphia Federal Reserve Bank's June economic survey showed contraction in the highly industrialised mid-Atlantic region for the first time in over two years. The Philadelphia Fed index came in at minus 2.2, its first negative reading in 25 months, well down from May's 7.3 reading. Zero marks the survey's threshold between expansion and contraction. Economists had expected a June reading of 10.
The price of the benchmark 10-year Treasury note turned 4/32 higher to yield 4.09 percent compared with 4.11 percent on Wednesday. The two-year note was about flat and yielding 3.71 percent, compared with 3.72 percent late on Wednesday.
Five-year notes were 1/32 higher to yield 3.88 percent. The 30-year bond was 6/32 higher to yield 4.40 percent.
The survey took many in the market by surprise because a separate "Empire State" survey of New York State factories on Wednesday came in considerably stronger than expected.
"It seems the New York and the Philly Fed index did a bit of a role reversal: New York was very weak last month and bounced back this month and there was the opposite pattern with Philly," said Jay Feldman, an economist at Credit Suisse First Boston in New York.
Given that the Philly Fed survey is seen as probably the most reliable of the regional US manufacturing surveys, the question is whether the weakness in Thursday's report will be reflected in June national factory data due early next month.
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