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Bonds Recoup Some Losses As Stocks Hit Session Lows

Treasury debt prices shed losses to trade narrowly mixed Monday as stocks extended their losses to trade at session lows.

The benchmark 10-year Treasury note was trading 3/32 lower in price for a yield of 3.87 percent from 3.86 percent late Friday, while the 2-year Treasury note was trading 1/32 higher in price for a yield of 2.43 percent from 2.46 percent late Friday.

Bonds briefly fell after a stronger-than-expected April services indexfrom The Institute for Supply Management which put the massive non-manufacturing sector back into growth mode.

The Institute for Supply Management's non-manufacturing index came in at 52.0 in April versus 49.6 in March. A reading above 50 indicates growth in the service sector.

Economists had expected a reading of 49.1 for April, according to the median of forecasts in a Reuters poll.

Federal funds rate futures priced in a 10-percent probability that the Federal Reserve will cut the target fed funds rate by 25 basis points at a policy meeting in June, down from a 14 percent chance of a cut prior to the release of the ISM non-manufacturing data.

Stocks opened lower after Microsoft dropped its bid for Yahoo and a brokerage report said Bank of America is likely to renegotiate its deal to acquire Countrywide Financial.

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