By Saumya Vaishampayan, MarketWatch
NEW YORK (MarketWatch) — Treasurys erased morning losses on Monday, the first day of trading after the long weekend in the U.S., as the ISM manufacturing survey posted a surprise decline in March.
Yields on the benchmark 10-year U.S. Treasury note 10_YEAR -0.43% traded at 1.85% after the data release, compared with 1.87% earlier.
Yields move inversely to prices and one basis point is one one-hundredth of a percentage point.
The ISM Index fell to 51.3% last month, the lowest pace of manufacturing expansion since December, compared with February’s 54.2%. Any level above 50% signals expansion. Economists polled by MarketWatch had expected the index to remain unchanged.
Separately, construction spending rose 1.2% in February, showing faster-than-expected growth, according to data from the Commerce Department.
Investors will watch for Friday’s nonfarm payrolls report and the unemployment rate, which is a key indicator in the Federal Reserve’s monthly asset purchases. Recent data has illustrated the opposing forces of improving U.S. economic growth and growing European concerns in the Treasury market.
“We’re sort of in between economic growth here in the U.S. exceeding expectations in the first quarter so far, causing yields to rise, but on the other hand, we have concerns about Europe, and that’s going to limit the rise in yields,” said Gary Pollack, head of fixed-income trading at Deutsche Bank AG’s private-wealth-management unit.
The Fed said in December it will continue purchasing $85 billion a month in Treasury and mortgage debt at least until the jobless rate falls to 6.5%, though that number may be more of a guideline than a hard-and-fast rule.
February’s jobs report beat economists’ expectations, posting the fastest rate of job creation since November as the jobless rate fell to its lowest level since December 2008.
U.S. stocks edged lower on Monday in the wake of the ISM survey, which is a big market indicator, said Pollack. The Treasury market is watching U.S. stocks for cues today, he added. “I think it’s more consolidation and people waiting to see how equities open this morning,” said Pollack.
Yields on the 30-year U.S. bond 30_YEAR -0.48% reversed direction after the data to settle at 3.1% and yields on the five-year note 5_YEAR -0.66% were 0.764%.
Disappointing data in China and Japan weighed on Asian markets, impacting early Treasury trading. Japanese manufacturers continued to be pessimistic about business sentiment from January to March, according to the Bank of Japan’s quarterly “tankan“ survey.
The official Chinese purchasing managers’ index rose to 50.9 in March from last month’s reading of 50.1, but that increase in manufacturing activity could be due to seasonal factors rather than growth.
European markets remained closed for Easter Monday.
Saumya Vaishampayan is a MarketWatch reporter based in New York. You can find her on Twitter @saumvaish.
