Treasurys slump on upbeat economic reports
Prices for U.S. debt fall after stronger-than-expected reports on manufacturing and real estate saps demand for safe-haven assets.
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NEW YORK (Reuters) -- U.S. Treasurys fell Monday after stronger-than-expected data on manufacturing, construction and home sales spurred hopes of a solid economic recovery and dented demand for safe-haven U.S. debt.
Losses were limited however, with many investors unwilling to take a strong position as they wait for the Federal Reserve to speak Wednesday after its two-day monetary policy meeting and look ahead to Friday's October non-farm payrolls report.
Any signs from either event of further economic recovery could bolster investors' risk appetite, to the detriment of bond prices, while signs the recovery is faltering could boost the safety-appeal of government debt.
"We had very strong data today which raises the risk that we might have a further sharp narrowing in the non-farm payroll job declines" said Josh Stiles, bond strategist at IDEAglobal in New York.
"We have some risks in the Treasury market in that the (Federal Reserve) might tone down its statement a little bit," in terms of keeping interest rates at the current ultra-low level near zero for an extended period, Stiles said.
The benchmark U.S. 10-year Treasury note traded 12/32 lower in price to yield 3.43%, up from 3.39% late Friday, while two-year notes traded 2/32 lower to yield 0.93% from 0.90%.
The good news on the economy Monday included the Institute for Supply Management's factory index, which showed U.S. manufacturing grew for the third straight month.
The National Association of Realtors said pending sales of previously owned U.S. homes unexpectedly rose in September to the highest level in nearly three years.
Also, U.S. construction spending made its largest gain in a year in September, aided by a big rise in private residential building and a record pace of public construction, the government said.
Market analysts Wednesday will put the Fed's Federal Open Market Committee's statement under a microscope.
At issue is whether more hawkish members of the Federal Open Market Committee, the Fed's policy arm, will manage to make the Fed statement slightly less dovish by removing the word "extended" from the Fed's current commitment to keep interest rates low for an extended period.
The Fed's statement could retain the "extended period" phrase or go back to the language it had earlier in January, which was just to keep rates low without specifying for an extended period, analysts said.
In the latter case, they said, the Fed would try to emphasize that removing the word "extended" did not imply a rate hike at the December meeting or any time soon.
For non-farm payrolls, the median of forecasts from economists polled by Reuters is a contraction of 175,000 jobs in October after narrowing by 263,000 jobs in September.
"This week will bring a significant amount of event risk in the form of a two-day Fed meeting which begins tomorrow and Friday's fretted unemployment report," said Carley Garner, senior analyst at DeCarley Trading in Las Vegas.
Five-year Treasury notes traded 5/32 lower in price Monday to yield 2.35%, up from 2.32 percent late Friday, while 30-year bonds traded 24/32 lower to yield 4.27% from 4.23%. 
