NEW YORK (CNN/Money) -
Treasury bond prices edged higher Monday, as investors proved reluctant to make any major bets ahead of key events such as a speech from the Fed chairman and the crucial September jobs report.
Meanwhile, the U.S. dollar rose sharply against the euro and the Japanese yen, after the Group of Seven richest nations
produced no surprises at its weekend meeting, repeating a call for more currency flexibility.
In late afternoon trading, the benchmark 10-year note rose 3/32 to 100-19/32 to yield 4.18 percent, down from 4.19 percent late Friday. The 30-year bond gained 6/32 of a point to 106-15/32 to yield 4.93 percent, down from 4.94 percent late last week. Bond prices and yields move in opposite directions.
The two-year note shed 1/32 to 99-23/32 to yield 2.65 percent, and the five-year note climbed a tick to 99-25/32 to yield 3.42 percent.
In the currency market, the dollar rallied broadly after the G7 again called for more currency flexibility. But the rally did not raise pressure on China to revalue its currency, removing weight off the greenback.
The euro bought $1.2285, down from $1.2410 late Friday, and the dollar bought ¥110.96, up from ¥110.47 late last week.
In the bond market, investors were reluctant to make any sharp moves ahead of Friday's employment report for September, which as always could drastically alter the outlook for growth and monetary policy going forward, analysts said.
"We've experienced a significant decline in the market over the past number of days, and I don't think people are going to be willing to commit to buy it ahead of the payrolls report," Mary Ann Hurley, vice president of fixed-income trading at D.A. Davidson & Co. in Seattle, told Reuters.
Also on tap is a speech Tuesday by Fed chief Alan Greenspan. While he is not expected to address the economy directly, any commentary that even remotely touches upon the outlook for interest rates is likely to garner much attention.
Factory data out on Monday had little market impact but were broadly in line with the view that the economy is still humming along at a respectable clip.
Factory orders shrank 0.1 percent in August, but that was mostly due to a sharp drop in demand for civilian aircraft, while the prior month's growth rate was revised higher.
"Volumes are still strong enough to generate a few new factory jobs amid robust productivity gains," Steven Wood, chief economist at Insight Economics, told Reuters. "Moreover, capital spending appears to be on track for another solid contribution to third quarter GDP."
There was the rub for bond bulls, who were still clinging to hopes that a raft of soft economic news could convince the Fed that a "neutral" level for interest rates should be lower in this unusual recovery than in earlier business cycles.
The recent spike in oil prices probably supports that angle, so an easing of crude costs from record highs above $50 a barrel was not helpful to Treasuries.
Comments from Philadelphia Fed President Anthony Santomero on Monday that hinted at the need for considerable further monetary tightening were also not what the bond market wanted to hear.
Other Fed speakers, including Board Governors Ben Bernanke and Susan Bies, also sounded optimistic about the economy, preventing Treasuries from making much headway.
-- Reuters contributed to the story
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