Treasury prices edge up as markets off lows

Reuters with


U.S. Treasury prices edged higher as the markets erased their losses after mixed economic data.

Yields on benchmark 10-year Treasury notes—used to calculate mortgage rates and other consumer loans—stood at 2.52 percent, down from 2.54 earlier in the day but still above the low of 2.51 percent touched last week after first quarter GDP was revised lower.

The 30-year bond rose 13/32 in price to yield 3.35 percent, little changed from morning trading.

Earlier, pending home sales for May surged past the expected rate while the Chicago purchasing managers' index (PMI) saw a larger-than-expected decline for June.

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"There is reluctance to have the same size of positions today, because traders don't want to be burned again," said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch in New York, referring to their bearish positions at the start of the quarter.

She said traders who had bet on higher interest rates this quarter have been hurt by a decline in yields. Falling yields, which indicate higher prices, have been a trend this year, and the Barclays U.S. Aggregate Bond Index has risen about 3.8 percent on expectations for low inflation and relatively slow growth.

The performance has defied initial expectations by many investors that interest rates would spike higher this year in response to the U.S. Federal Reserve's continued cuts in monthly bond-buying.

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The Barclays index has risen 3.82 percent in the first half, led by a rally in long-dated debt as benchmark yields have fallen nearly 0.50 percentage point. Treasurys due in 20 years or longer have earned a 12.67 percent return in the first six months, putting them on track for their strongest first-half performance in four years.

Long-dated investment-grade corporate bonds had a 10.45 percent return. Munis ranked third in total return, generating a 5.97 percent gain, according to Barclays.

Treasury prices were not likely to have big swings ahead of the payrolls data on Thursday, said Chris McReynolds, head of U.S. Treasury Trading at Barclays in New York.

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Economists expect the report to show employers added 212,000 jobs in June, down from 217,000 jobs in May, according to a Reuters poll.

—By Reuters. contributed to this report.