Bonds rise on weak manufacturing data
Treasurys get a boost from weak manufacturing data and renewed doubt about impending Fed rate increases.
NEW YORK (CNNMoney.com) -- Bonds rose Monday after a government report showed lower manufacturing activity in New York State.
The Federal Reserve Bank of New York's manufacturing survey showed a 5-point drop in manufacturing activity in June, driving the index deeper into negative territory. A decline in manufacturing activity can be a sign of future economic trouble for businesses.
Bonds are largely considered a safe investment in times of economic turmoil. Investors also tend to jump to bonds when stocks are under pressure. Stocks were struggling for direction on Monday as oil surged to a new high during early trading.
Treasurys edged higher as some investors began to doubt that the Federal Reserve was concerned enough with inflation to begin actively raising its key interest rate, an assertion aggravated by Robert Novak's column in the Washington Post. Citing sources close to Federal Reserve Chairman Ben Bernanke, Novak said that Bernanke was more concerned about surging energy prices than inflation.
Andrew Brenner, a senior vice president of MF Global who believes that the Fed will keep its funds rate steady at 2%, said the column gave the bond market a little lift.
The 2-year note rose 1/32 to 99 8/32 and yielded 3.02%, down from 3.03% late Friday. The 2-year note tends to be the most sensitive to interest rate changes. If rates climb and boost Treasury yields, the notes bought prior to the rate hike will have less attractive yields.
Meanwhile the benchmark 10-year note rose 3/32 to 97 and its yield fell to 4.25% from 4.26% late Friday. The 30-year long bond rose 12/32 to 93 18/32, and yielded 4.78%, down from 4.80% late Friday.
On Tuesday morning, investors will be eagerly awaiting Goldman Sachs' (GS, Fortune 500) financial results to see what the bank says about its future profitability, according Brenner. "If Goldman is saying that earnings are good" then bonds will go down, he said. 
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