Dovish Yellen no help for bond yields; US data add to woes


Longer-dated U.S. Treasuries yields edged higher on Tuesday after upbeat U.S. manufacturing data, while intermediate-dated Treasuries yields held steady in the wake of recent comments from Federal Reserve Chair Janet Yellen.

The Institute for Supply Management said its index of national factory activity rose to 53.7 in March. While that was below economists' median forecast of 54.0, it still marked a second straight month of accelerated growth. The data sent Wall Street on an early rally that pulled the S&P 500 Index to a new record high above 1880

"We are out of the woods with regards to bad weather," said Wilmer Stith, fixed income portfolio manager for Wilmington Trust in Baltimore, Maryland, in reference to frigid temperatures which hurt economic data at the start of the year.

He said the data led to slight selling pressure on longer-dated Treasuries. Longer-term Treasuries bonds tend to decline in price in reaction to positive economic data, which signal stronger growth and inflation, which erode the value of longer-dated debt more than short-dated issues.

The last traded down 22/32 in price to yield 3.6 percent, compared to a yield of 3.56 percent late Monday. The benchmark 10-year Treasury note was last down 8/32 in price to yield 2.76 percent, compared to a yield of 2.72 percent late Monday.

Short- and intermediate-dated Treasuries notes were roughly unchanged, meanwhile, in the wake of Yellen's comments on Monday, which were perceived as more dovish than earlier remarks.

Yellen gave a strong defense of the Fed's easy-money policies in a speech to a community investment conference in Chicago Monday, offsetting comments perceived as more hawkish at a March 19 press conference. The March 19 comments, which included a suggestion that the Fed could raise interest rates earlier than expected, triggered a selloff in Treasuries, especially short- and intermediate-dated notes.

--By Reuters