Treasury market eyes more Fed purchases

By Ben Rooney, staff reporter

NEW YORK ( -- Treasury yields were mixed Friday amid speculation that weak economic data will spur the Federal Reserve to accelerate its purchases of U.S. bonds and notes.

The yield on the 10-year note rose to 2.53% from 2.52% late Thursday as its price edged lower. The yield on the 30-year note rose to 3.72% from 3.69%.

But the shorter end of the yield curve was under pressure. The yield on the 2-year note was 0.43%, versus 0.44%, and the 5-year yield slid to 1.27% from 1.28%.

Yields rallied early in the session after a key index of activity in the manufacturing sector fell to a 9-month low. It was the latest in a string of disappointing economic reports an raised bets the Fed will expand its purchases of U.S. Treasurys, a policy called quantitative easing.

"At this stage, it is looking increasingly likely that the Fed will announce a new round of purchases, probably before the end of the year," economists at Capital Economics wrote in a research report.

The Institute for Supply Management's manufacturing index slipped to 54.4 in September, from 56.3 in August. The amount fell short of the 54.8 reading expected in a consensus of economists.

Any reading above 50 signals growth, but the index showed that new orders for manufactured goods and production both fell significantly in the month.

Separately, the U.S. Commerce Department said personal income increased 0.5% in August, while spending rose 0.4%. Economists expected both consumer spending and income to have risen 0.3% in August.

"Overall, the ISM and personal income reports are consistent with another quarter of pretty tepid growth to end the year," the Capital Economics report said. "2011 is unlikely to be much better." To top of page

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