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Bond prices slip, investors pausing ahead of US data

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Yield
 
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US 3-MO
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US 1-YR
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US 2-YR
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US 10-YR
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US 30-YR
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U.S. Treasurys sold off on Monday, marking a mixture of consolidation from last week's sharp decline and low trading volumes given holidays in Tokyo and London.

Investors looked past a report showing new orders for U.S. factory goods had their biggest increase in eight months in March, rising 2.1 percent versus forecasts for a 2.0 percent gain. The gains were driven by demand for transportation equipment, but the underlying trend remained weak against the backdrop of a strong dollar.

"We're coming off last week's highs (in yields) but on very light volumes. I think the market is looking for some stability and toward Friday's payrolls data," said Justin Lederer, an interest rate strategist at Cantor Fitzgerald in New York.

The rest of the week holds reports on business activity in the critical services sector, the ADP national employment report, weekly jobless claims and finally the Labor Department's non-farm payrolls report for April on Friday.

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Recent U.S. economic data have shown a moderating growth rate, injecting some doubt as to when the U.S. Federal Reserve will finally lift U.S. interest rates off of their zero-bound level.

"A lot of U.S. data this week and I've been thinking the front-end will be more informative, because if you do get a pickup in data over this week, then that implies a September hike is not out of the question," said Priya Misra, rates strategist at Bank of America Merrill Lynch in New York.

"If data comes in stronger than expected this week, then 10 years will sell off, but much less than the front-end. The front-end looks more mispriced and that's where the catch-up will be felt more. We are looking for a rebound in data," she said.

Benchmark 10-year U.S. Treasury yields were up by 2 basis points to 2.14 percent. The yield is off its earlier seven-week high.

Thirtty-year Treasury bond yields rose 5 basis points to 2.88 percent. The 2-year Treasury note was unchanged at 0.60 percent.

While Tokyo is closed for the Golden Week holidays and London's market is shuttered for the early May bank holiday, trading in continental Europe has the German bund yield rising above 0.40 percent as deflation fears ease.