Treasuries saw notable strength during trading on Monday, benefiting from some troubling news from overseas as well as weakness on Wall Street.
After showing a strong upward move in early trading, bond prices gave back some ground in the afternoon but still closed firmly positive. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, fell by 3.7 basis points to 1.933 percent.
With the drop, the ten-year yield extended a recent downward move, ending the session at its lowest closing level in almost two months.
The strength among treasuries was partly due to some disappointing economic data from overseas, with a report from HSBC Holdings and Markit Economics showing a continued contraction in Chinese manufacturing activity in the month of April.
While the manufacturing purchasing managers' index for China climbed to 49.1 in April from 48.3 in March, a reading below 50 indicates a contraction.
A separate report from Markit showed that its index of private sector activity in the Eurozone dropped to a five-month low of 47.4 in April from 49.1 in March.
Markit Chief Economist Chris Williamson said, "The flash PMI signaled a faster rate of economic contraction in the Eurozone during April, extending what appears to be a double-dip recession into a third consecutive quarter."
Treasuries also benefited from news that French President Nicolas Sarkozy came in second in a first round of voting, losing to socialist Francois Hollande.
Sarkozy is expected to face an uphill battle in a run-off election against Hollande on May 6th, raising concerns about a setback to efforts to diffuse the European debt crisis.
Housing data is likely to attract some attention on Tuesday, with traders likely to keep an eye on reports on home prices and new home sales. The Conference Board is also scheduled to release its monthly report on consumer confidence.
Nonetheless, trading activity may be somewhat subdued ahead of the Federal Reserve's monetary policy announcement on Wednesday.
by RTT Staff Writer
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