Treasury yields continue modest rebound

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NEW YORK (CNNMoney) -- Treasury yields moved slightly higher Monday as investors tried to sort through the aftermath of one of the most volatile trading weeks in recent memory.

By the close of trading, the yield on the benchmark 10-year Treasury note had ticked up to 2.29% -- still a very low level.

After a very busy week, investors remain somewhat shell-shocked, but will have plenty of economic indicators to focus on in coming days -- kicked off Monday by a report on manufacturing in New York state.

The Empire State manufacturing index showed that manufacturing activity contracted for a third straight month in August. The figure fell to minus 7.72 from minus 3.76 the prior month.

Last week, Treasury yields plunged as investors reacted to a downgrade of the U.S. credit rating by Standard and Poor's, and the resulting volatility in equity markets.

"I think the market is resigning itself to the fact that we are about to enter a time of wild volatility and disparate views on politics, economic growth, taxes and health care," Kevin Giddis, managing director of fixed income at Morgan Keegan, said in a research note.

Some observers were sure a downgrade would scare investors away from Treasuries.

At least initially, the wrist-slap from S&P had the opposite effect: Investors reacted to a week of fire and brimstone headlines by seeking the familiar safety of U.S. debt.

But there are some signs that foreign investors might not be quite as enthusiastic about U.S. debt as they have been in the past.

On Monday, the Treasury Department released data showing private foreign net purchases of U.S. government debt fell by $18.3 billion in June -- just as the debate over the debt ceiling intensified.

And net purchases by foreign official institutions were $11.5 billion, down from $23.2 billion in May.

That data point was taken before the downgrade. But last week, foreign demand for Treasuries was tested during regularly-scheduled bond auctions conducted by the Treasury.

Short and medium-term bonds drew a substantial amount of demand at auction.

But during Thursday's sale of 30-year bonds, the first long-term bonds auctioned in the AA+ era, demand dropped off a cliff as foreign investors stayed on the sidelines.

The difference? The Fed's decision to keep key short-term rates low means a measure of stability for medium-term bonds. But 30 years into the future? All bets are off.

"Last week's auction may have been a precursor of what the future holds," Giddis wrote. "[I]t appeared that no one on the globe wanted to own long bonds at these levels."

Do you own a 30-year Treasury bond with an interest rate yielding over 14% (or even 15%!) that is maturing soon? How much is it worth? What are you planning to do with the money? Contact jordan.malter@turner.com with your story.