By MIN ZENG Treasury bonds extended their price strength into a sixth session, a notable recovery from the selloff in recent weeks. The recovery in the safe-haven market signals growing caution among investors amid the uncertainty of the euro zone's debt crisis. Hopes the Federal Reserve will buy more longer-dated bonds to support the economy have also regained some traction after the central bank's meeting minutes earlier this week signaled policy makers are getting closer to acting. The benchmark 10-year note was 5/32 higher in early New York trade to yield 1.647%. The 30-year bond was 11/32 higher to yield 2.762%. Bond prices move inversely to their yields. The 10-year yield has dropped from a three-month peak of 1.863% hit on Aug. 21, though the yield remains much higher from the record low of 1.379% set on July 25. Investors had dumped Treasury bonds and embraced stocks in the previous few weeks as optimism grew that the European Central Bank would roll out a bold plan at its Sept. 6 policy meeting to reduce borrowing cost in Spain and Italy, buying officials in these countries more time to address their fiscal and economic problems. Yet the hopes were tempered by a story from Bloomberg Friday that the ECB may delay the release of its game plan for the euro zone until after German court ruling, due Sept. 12, over the legality of the euro zone's permanent bailout fund. ECB President Mario Draghi said in August that the central bank would step in to combat the debt crisis on the condition that Spain or Italy needs to officially request support from the bailout fund. In the U.S., the Fed's minutes for its July 31-Aug. 1 meeting boosted speculation that it would add new monetary stimulus from its Sept 12-13 policy meeting. The minutes showed "many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery." Many bond bulls believe a new bond-buying program with purchases in both longer-dated Treasury bonds and mortgage-backed securities would bolster the value of Treasurys as the Fed aims to hold interest rates lower for longer to encourage consumer spending and boost employment. Friday's mixed durable goods report lent some support to the argument for the Fed to act. While the headline number was a bigger-than-forecast rise of 4.2%, analysts noted the strength was mostly driven by the transportation sector. Stripping that out, the report showed orders posted the biggest decline in eight months. "Details are miserable," said David Ader, head of rates strategy at CRT. With hopes rising on the Fed to act, any disappointment from the central bank next month could spark unwinding of Treasury bonds, traders said. Selling could also emerge if the ECB delivers a plan to shore up investors' confidence over policy makers' ability to contain the debt crisis, traders said. The flip side is that Treasury bonds could rally if the ECB fails to live up to market expectations and appetites for riskier assets could pull back.

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