NEW YORK (AFX) - Treasury bond prices rose slightly Tuesday, with the yield on the 10-year note closing around its lowest level in a month and a half, despite robust U.S. inflation and economic data.
At 5 p.m., the 10-year Treasury note was up 1/32 from Monday. Its yield, which moves in the opposite direction, was unchanged at 4.98 percent.
The 30-year bond rose 2/32. Its yield was virtually unchanged at 5.07 percent.
The 2-year note was unchanged. Its yield remained at 4.96 percent.
Yields on 3-month Treasury bills were 5.11 percent, as the discount rose to 4.99 percent.
A decline in U.S. stocks, the covering of short positions -- past bets that Treasury prices would fall -- and other technical factors helped lift U.S. government bond prices during afternoon trading.
Treasurys fell back early in the day after the Commerce Department reported that its closely-watched core personal consumption expenditure index rose 0.2 percent in June.
The year-over-year core PCE lifted 2.4 percent, up from its 2.2 percent yearly pace for May and April. The PCE price index is a preferred inflation gauge of the Federal Reserve, whose understood comfort zone for the data is 1 percent to 2 percent.
Later Tuesday, the Institute for Supply Management's July manufacturing index came in at 54.7, above an expected reading of 53.6, and higher from June's 53.8. A reading above 50 implies an expansion. The prices paid sub-index was at 78.5 versus 76.5 in June.
The stronger-than-expected ISM data and inflation pressures might have strengthened the case for the Fed to raise rates when it meets Aug. 8.
The Fed has raised rates at 17 straight meetings, taking its current target funds rate from 1 percent in June 2004, to 5.25 percent.
However, investors only tweaked higher the odds of an August rise in Fed funds futures contracts. Late Tuesday, investors were pricing 36 percent into the August contract, from 31 percent earlier in the session.
Raymond Remy, head of fixed-income at Daiwa Securities America, said with time running out before the Fed meeting, 'secondary data is taking on less importance in the market.'
'Today's data certainly showed some life in the economy, but the market is much more focused on the employment report, next week's (quarterly Treasurys) refunding' and the Federal Open Market Committee's next rate decision.
On Friday, the U.S. releases its July employment report, with payrolls seen growing 150,000 last month.
Michael Mackenzie contributed to this article.
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