US Treasury debt prices eased slightly on Tuesday as investors felt wary of making any major moves ahead of the Federal Reserve's interest rate decision and monthly employment figures due later this week. With the two-day central bank meeting already underway, bonds were barely fazed by a mild pullback in US manufacturing growth reported in a survey from the Institute for Supply Management.
In fact, that decline was largely neutralised by a jump in the ISM's jobs component, which bond bulls worried might hint at a strong payrolls figure for January.
The monthly jobs report is slated for release on Friday, making it simply too risky for traders to take decisive positions in a range-bound market.
This hesitancy left benchmark 10-year notes down a modest 2/32 for a yield of 4.14 percent compared with 4.13 percent on Monday. In contrast, two-year notes were flat and yielding 3.28 percent.
That represented only a tiny reversal of the recent flattening trend in the yield curve, taking the spread between those two maturities one basis point wider.
As for the day's data, the ISM's index of factory activity dropped to 56.4 in January from a revised 57.3 in December. Analysts had looked for a dip to 57.0 and noted new orders slowed more sharply, perhaps dimming the outlook for growth ahead.
But bond bulls were restrained by a near five-point jump in the employment index to 58.1. There has been little correlation between this measure and actual jobs growth in manufacturing, but the rise might still stir speculation of a healthy January payrolls report.
The tug-of-war left Treasuries in limbo. "The market's still at where we were before the number," said Evan Rourke, bond strategist at Popular Securities.
Auto sales figures for January were also pouring in on Tuesday, but were largely meeting expectations for a retreat from December's strong results. The running total of sales of North American-made vehicles for last month was close to 13 million units, down from 14.7 million in December.
Neither piece of data did anything to affect expectations the Federal Reserve will raise interest rates when its policy meeting ends on Wednesday, and the market is still pricing in rates of 3.0 percent by the summer.
Other figures were of only marginal interest to the market. Construction spending rose 1.1 percent, amounting to a record $1.032 trillion annual rate, compared with an upwardly revised $1.021 trillion in November, the Department of Commerce said.
The 30-year bond was down 6/32 and yielding 4.60 percent, while five-year notes were down 1/32 for a yield of 3.71 percent.