Treasuries gain

US Treasury debt prices gained on Tuesday after the release of minutes from the August 10 Federal Reserve policy meeting said Fed policymakers saw increasing risks to economic growth. The minutes underscored investors' concerns that the US recovery is faltering - worries that are burnishing the appeal of lower-risk government debt.
"The overwhelming viewpoint is that the numbers we will get later this week will be indicative of a slowing economic scenario," said Kevin Flanagan. Government bond investors shrugged off some stronger-than-expected economic reports on Tuesday, as they fretted about what the monthly jobs report due at the end of the week would reveal about labour market weakness. The benchmark 10-year Treasury note's price, which moves inversely to its yield, traded up 16/32 for a yield of 2.48 percent, compared with 2.54 percent late on Monday. The median of forecasts from analysts polled by Reuters is for a loss of 100,000 non-farm payrolls jobs in August after they contracted by 131,000 in July.
The 30-year Treasury bond was up more than a full point in price for a yield of 3.52 percent, down from 3.59 percent late on Monday. The move, combined with Monday's price gains, resulted in the 30-year bond's having clawed back a good chunk of its losses from Friday when it suffered its biggest single-day dip in 15 months.
"The Treasury market is trading higher as we have all but gained back the price losses that were created on Friday by the bond version of 'irrational exuberance,'" said Kevin Giddis, president of fixed income capital markets at Morgan Keegan in Memphis, Tennessee. Investors sold Treasuries on Friday after Federal Reserve Chairman Ben Bernanke did not signal in a speech in Jackson Hole, Wyoming, that any quantitative easing program from the US central bank was imminent.
August has proven a banner month for government bonds, with benchmark 10-year notes and the 30-year bond on track for the biggest monthly dip in yield since November 2008 when the financial sector was reeling from the Lehman Brothers bankruptcy and the credit crisis reached its peak.
Treasuries also got some support on Tuesday from month-end buying by fund managers looking to align the length of maturities in their portfolios to benchmark indices. However, a good portion of month-end buying may have taken place on Monday, said John Spinello, Treasury bond strategist at Jefferies & Co in New York.