Bond Losses Eased by Drop in Stocks

U.S. Treasury debt prices fell Tuesday as traders booked profits on recent price gains and a report showing home price data that was not quite as dire as forecast.

Losses were limited, however, as weakness in stocks and data showing lower consumer confidence in June helped to maintain at least some interest in Treasurys as a safe-haven investment.

Bond prices have generally been rising and yields falling since mid-June, in part on relief over Treasury auctions that have shown there is still a global appetite for the deluge of new U.S. government debt. On Tuesday, however, investors decided to take back some of the recent price gains.

"Prices are under pressure, both on profit-taking from recent gains and on the better-than-expected Case-Schiller home price figures," said John Canavan, analyst with Stone & McCarthy Research Associates in Princeton, N.J.

Benchmark 10-year Treasury notes were trading 5/32 lower in price for a yield of 3.50 percent, up from 3.48 percent late Monday.

Although investors moved Tuesday to take profits on recent gains, the second quarter has not been a pretty one for Treasurys, with benchmark yields on track for the biggest quarterly rise in at least 12 years, according to Reuters data.

Yields have risen over 80 basis points in the past three months.

The 30-year bond was trading 8/32 lower for a yield of 4.30 percent from 4.29 percent.

The Standard & Poor's/Case Shiller home price indexes of single-family home prices in 20 metropolitan areas dipped 0.6 percent in April from March, after a 2.2 percent decline the previous month, for an 18.1 percent downturn from a year earlier.

Economists had been looking for a 1.8 percent dip in April from March.

"You have data showing things were not as bad ... so you have the market tipped over the other way," said James Caron, head of global rates research with Morgan Stanley in New York, adding that "a lot people may have done their month-end and quarter-end buying yesterday, so you are seeing a bit of correction."

Bonds did pare some losses after The Conference Board said its index of consumer attitudes dropped to 49.3 this month from a downwardly revised 54.8 in May. Economists had forecast a reading of 55.0 for June.

Two-year notes traded 1/32 lower in price for a yield of 1.12 percent, up from 1.10 percent late Monday, while the five-year note 4/32 lower to yield 2.55 percent, from 2.52 percent.

Trade volume was below average in the holiday-shortened week, with markets closed Friday for the Independence Day holiday.

Ahead of that, however, traders are anxiously awaiting June non-farm payrolls data, to be released by the government Thursday morning.

The median of forecasts from economists polled by Reuters is for a loss of 363,000 jobs this month after 345,000 lost jobs in May.

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