Treasuries rose before an industry report that that may show manufacturing contracted
in the U.S. last month, reviving concern the slowdown in the world's largest economy
is deepening. The gains put two-year yields on track for the biggest back-to-back daily
drop in two weeks as declining stocks and rising corporate bond risk in Europe
boosted demand for the relative safety of government debt. A government report this
week may show the U.S. lost jobs for a fifth straight month in May, according to
economists surveyed by Bloomberg News.
The yield on the two-year note dropped 7 basis points to 2.58 percent at 7:56 a.m. in
New York, according to bond broker BGCantor Market Data. The 2.625 percent
security due in May 2010 rose 5/32, or $1.56 per $1,000 face amount, to 100 3/32. The
10- year yield dropped 4 basis points to 4.02 percent. The two-year yield will probably
be 2.6 percent at the end of this month, while the 10-year yield may drop to 4 percent,
Schnautz predicted. Yields move inversely to bond pieces. The market is unchanged
to .125 better in discount this morning.
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