Justin Lederer Comments: TREASURIES OUTLOOK-U.S. bond prices rise on disappointing data

 December 01, 2015, CNBC Online

NEW YORK, Dec 1 (Reuters) – U.S. Treasury debt prices rose on Tuesday, with benchmark yields touching near one-month lows after data showed that U.S. factory activity fell in November to the lowest level in six years. Yields maturing between two and 30 years initially fell to session lows after the Institute for Supply Management’s gauge on U.S. services industries came in at its weakest since June 2009. Economists expected the ISM reading to come in at 50.5 percent, but it slid to 48.6 just a day after weaker-than-expected data indicated a contraction in the Midwest factory sector. A reading of 50 or above means the sector is expanding. "The Treasury market has pretty surprisingly traded better on weaker-than-expected ISM," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York. U.S. benchmark 10-year Treasury notes were last up 19/32 in price to yield 2.150 percent, down sharply from a yield of 2.218 percent on late Monday. The 10-year yield hit a near one-month low of 2.145 percent in the wake of the U.S. manufacturing data. The U.S. 30-year bond yield also touched a one-month low of 2.908 percent. The bonds were last up 1-17/32 in price to yield 2.912 percent, down from a yield of 2.990 percent late Monday. Federal Reserve Bank of Chicago President Charles Evans said despite the weak U.S. manufacturing reading, economic fundamentals remain strong. Economists expect Friday’s closely watched employment report to show employers added 200,000 jobs in November, according to a Reuters poll. Evidence of further improvement in the U.S. labor market, viewed by many as a key data indicator, would reinforce expectations that the Federal Reserve will raise interest rates this month. In addition to the disappointing data and dovish tone from Evans, fears that a blast near an Istanbul metro station was a bomb drove investors to safer U.S. Treasuries. "There’s a bit of unease in the marketplace around attacks given what happened in Paris, so at the margin the news out of Istanbul added a very modest flight to quality," said Kevin McNeil, U.S. rates strategist at RBS Securities in Stamford, Connecticut.