Treasury Prices Rise After Economic Data Releases

Investors took in news about the Institute for Supply Management Manufacturing index, construction spending, and first quarter productivity

Standard & Poor's Equity Research

MARKETSCOPE : Treasuries rose on Thursday after economic data indicators alleviated inflation concerns.

The benchmark 10-year Treasury note edged up 03/32 to 100-05/32 for a yield of 5.10%, while the 30-year bond rose 09/32 to 89-16/32 for a yield of 5.20%.

News hit that first quarter Productivity in the nonfarm business sector was revised upward to 3.7% from the 3.2% reported last month. The revision was a bit less than the market consensus of 3.9%. The revision reflects last week's Gross Domestic Product revision to 5.3% from the 4.8% reported initially.

The May ISM Manufacturing Index fell to 54.4 in May from 57.3 in April, which had risen from a 55.2 reading in March. U.S. pending home sales fell 3.7% in April after declining 1.3% in March and 0.8% in February. Initial Jobless Claims rose 7,000 to 336,000 in the week ended May 27 from 329,000 the week before.

Construction spending dropped 0.1% in April after rising 0.9% in March. The market consensus was for a 0.2% rise. Even with the slight April drop, spending is up 8.5% from a year earlier, according to David Wyss of Standard & Poor's in New York. (S&P, like BusinessWeek Online, is a unit of The McGraw-Hill Companies.)

"The ISM Manufacturing Index and Construction Spending reports showed some signs of economic slowing, but overall the data still appears reasonably healthy," says Drew Matus of Lehman Brothers, New York.

Investors continued watching such data for clues about whether the Fed has room to pause from its tightening cycle at its June 28 to 29 meeting.

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