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Bonds slip on service data
Treasury prices dip after service-sector growth report; dollar touches 32-month high versus the yen.
December 5, 2005: 5:12 PM EST

NEW YORK (CNNMoney.com) - Treasury prices slipped Monday after a November survey on the U.S. services sector suggested economic strength.

The dollar fell against euro, but topped a 32-month trading high against the yen.

The benchmark 10-year note sunk 13/32 to 99-14/32 to yield 4.57 percent, up from 4.52 late Friday. The 30-year bond fell 24/32 of a point to 108-30/32 to yield 4.76 percent, up from 4.72 in the previous session. Bond prices and yields move in opposite directions.

In shorter-dated debt, the two-year note was down two ticks, yielding 4.46 percent, and the five-year note fell 6/32, yielding 4.49 percent.

The Institute for Supply Management's November nonmanufacturing index was the first installment in another week of economic data, with Treasury prices declining following the report.

The pace of growth in the service sector slipped to 58.5 in November from 60 in October, the report said. The number was well above the 50 threshold that separates growth from contraction and reflected robust job growth as well as a benign reading on prices.

The number fell just short of Wall Street expectations of 59.

"The data were definitely strong. The economy is still showing strength. The only question is what happens next year," Mary Ann Hurley, a trader at D.A. Davidson & Co. in Seattle, told Reuters.

October factory orders and the third-quarter productivity report are both due out on Tuesday.

But investors are already looking ahead to the Federal Reserve's next policy meeting, scheduled for Dec. 13, with most analysts believing the central bank will invoke another quarter-point rate hike, bringing short-term interest rates to 4.25 percent.

The Fed has hinted that its monetary-tightening campaign may be coming to an end, but it could continue raising rates to combat inflation.

Inflation hurts bonds, because it erodes the value of the fixed-income investment. However, rising interest rates generally help the dollar, as they make dollar-denominated securities more attractive to foreign investors.

In currency trading, the dollar edged lower against the euro and reached a 32-month high against the yen before easing slightly.

The euro bought $1.1794, up from $1.1717 late Friday. The dollar bought ¥120.83, up from ¥120.47 in the previous session.

-- from staff and wire reports.

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