NEW YORK (CNN/Money) -
Treasury prices rallied Tuesday after reports on consumer confidence and regional U.S. manufacturing activity undermined the mood on Wall Street, inciting a setback for stocks.
At around 4 p.m. ET, the price of the benchmark 10-year Treasury note rose 1-3/16 points to 102-18/32, pushing its yield to 3.93 percent, down from 4.07 percent late Monday. The 30-year bond jumped 2-3/32 points to 107-1/2, driving down its yield to 4.88 percent from 5 percent late Monday.
The five-year note rose 23/32 of a point to 101-13/32, yielding 2.82 percent. The two-year note jumped 9/32 of a point to 100-10/32, yielding 1.47 percent. Bond yields and prices move in opposite directions.
Meanwhile, the greenback rose to ¥111.48 from ¥110.78 late Monday, and the euro traded at $1.1665 after buying $1.1597 late Monday.
The Conference Board's measure of consumer confidence slumped to 76.8 in September from a revised 81.7 the month before, confounding forecasts of a rise to 81.8.
Consumers reporting "jobs hard to get" climbed to a decade high of 35.3 percent, stirring speculation the critical September payrolls report due on Friday might also be weak.
That impression was reinforced by a sharp pullback in the Chicago Purchasing Management index of business activity to 51.2 in September from 58.9 in August. Analysts had looked for only a slight dip to 57.0.
Crucially, the index for employment fell to 45.3 from 51.2, pressuring analysts to revise down their hopes for forecasts for adding to the worries about payrolls.
"It's an ugly report and it's going to give bonds a great bid this morning," said Cary Leahey, an economist at Deutsche Bank Securities.
"The Chicago Purchasing Managers' (index) fell off a cliff, almost in a replay of 2002 where you ran into a brick wall in August and now we're running into a brick wall in September."
That in turn raised speculation that the Institute for Supply Management survey of national manufacturing, due on Wednesday, would fall short of expectations. Analysts had been looking for the ISM index to edge up to 55.0 from 54.7 in August.
All of which was a relief for fixed-income investors who have been fretting that the clear acceleration in overall economic growth seen this quarter would finally revive the labor market and hasten the day when the Fed tightens.
Treasurys had already been supported by rumors the Bank of Japan was intervening to restrain the yen after the dollar hit three-year lows. The Ministry of Finance later confirmed that it had intervened via the Federal Reserve.
Traders were startled to find that Japan spent a record ¥4.45 trillion ($40.23 billion) in September to restrain the yen. That was far higher than anyone expected and good news for the bond market since much of that cash would have ended up in Treasury and agency debt.
"It maybe helps to explain why yields have rallied so much in the last few weeks and why recent auctions met such good demand," said a trader at a U.S. primary dealer.
Since the start of this month benchmark 10-year yields have fallen from a 4.65 percent high to break under 4.00 percent, with the latest surge triggered by a two-year note auction which attracted surprisingly strong demand from foreign central banks.
-- Reuters contributed to this report.
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