Treasuries rise

US Treasury debt prices rose on Monday as the market recouped some of Friday's sharp losses, when Federal Reserve Chairman Ben Bernanke signalled the US central bank was not on the verge of a new round of bond buying. This week's housing, manufacturing and jobs data, which will offer clues to the extent to which economic growth is decelerating, could be catalysts for more big price swings in Treasuries on thin summer trading volumes, analysts said.
"A lot of today's action is give back from last week," said Thomas Simons, money market economist with Jefferies & Co in New York. On Friday, "we had such an incredible sell-off it would have been expected we would rally a little bit today," Simons said.
Friday's bond sell-off was the biggest this summer as traders took profits following Bernanke's speech, which disappointed investors who had positioned for a new round of quantitative easing from the central bank. Benchmark 10-year notes were trading 27/32 higher in price to yield 2.55 percent, down from 2.65 percent late on Friday.
Last week, benchmark yields hit 19-month lows around 2.42 percent; a level many analysts consider too low considering that the economy is still growing, albeit feebly. Yet given the very muted outlook for inflation, strategists expect a sharp rise in yields is unlikely over the near term. Early on Monday, a strong technical support level held of around 2.67 percent for the benchmark 10-year Treasury note's yield.
Thirty-year bonds were 1-18/32 higher to yield 3.61 percent, from 3.70 percent on Friday. Two-year notes gained 3/32 in price to yield 0.50 percent, from 0.56 percent. The price action flattened the Treasury yield curve, with the spread between the yield on two-year notes and 10-year notes narrowing to 205 basis points from 209 basis points late on Friday.
As part of its bond-buying program, the Fed on Monday bought $360 million of Treasury inflation-protected securities maturing January 2017 through April 2029. The central bank has bought $9.285 billion of securities since announcing the program August 10. Bond traders said they will watch minutes from the August 10 Fed policy-setting meeting due for release on Tuesday to see how divisive the debate was about how to manage the central bank's balance sheet.