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TREASURIES-Prices slip as investors lighten positions in data-heavy week
May 1, 2017 / 3:06 PM / 7 months ago

TREASURIES-Prices slip as investors lighten positions in data-heavy week

* Monday’s U.S. economic data weak overall

* Rate futures still pricing in 70 pct chance of June hike (Recasts, updates prices, adds comment, byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, May 1 (Reuters) - U.S. Treasury debt prices edged lower on Monday in choppy trading, with investors consolidating positions ahead of a slew of events and data this week, led by the Federal Open Market Committee meeting and April’s non-farm payrolls report.

Yields, which move inversely to prices, have come off their highs following a round of soft U.S. economic data that confirmed weak first-quarter growth.

U.S. Treasury prices rose on Friday, supported by institutional investor buying to meet routine month-end portfolio adjustments.

“To a certain extent, we are unwinding Friday’s month-end gains,” said Tom Simons, money market economist at Jefferies in New York.

“It’s kind of hard to rally a whole lot here even though data is not particularly encouraging. After the performance last week, there’s a cool-down period and some consolidation in front of data such as payrolls,” he added.

Reports on Monday showed that U.S. factory activity slowed in April, while consumer spending was unchanged in March and an important inflation measure recorded its first monthly drop since 2001.

The weak reports came before the Federal Reserve’s two-day policy meeting, which starts on Tuesday, with the U.S. central bank widely expected to hold interest rates steady. Investors are instead focused on the language of the Fed statement for guidance on the number of interest rates hikes this year and next.

Commenting on the drop in the U.S. manufacturing index to 54.8, compared with the consensus forecast of 56.5, Michael Pearce, U.S. economist at Capital Economics in New York, said the data should not prevent the Fed from raising rates again in June.

Interest rate futures are still pricing a 70 percent chance the Fed will tighten rates in June even after Monday’s poor U.S. economic data, according to the CME’s FedWatch.

“The big picture remains that, with a rapid appreciation of the dollar and large drop in oil prices now well behind us, the manufacturing sector is likely to provide a small boost to growth this year and next,” Pearce added.

In late morning trading, benchmark 10-year U.S. Treasury notes were down 2/32 in price to yield 2.289 percent, up from Friday’s 2.282 percent.

U.S. 30-year bond prices fell 9/32, yielding 2.967 percent, up from 2.952 percent late on Friday.

On the front end of the curve, two-year yields were at 1.273 percent, slightly up from Friday’s 1.27 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Chizu Nomiyama and Dan Grebler)

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