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NEW YORK —
Treasury prices fell Wednesday as the stock market rebounded from two straight sessions of losses and a reading on the service sector indicated modest growth for the second consecutive month. The Institute for Supply Management's service sector index came to 51.7 percent for May. While the figure was down from 52 a month earlier, a reading above 50 still signals an expansion. The report eased some fears that the economy is slowing dramatically and, along with the gains in stocks, curbed demand for the safety of government debt. David Ader, head of government bond strategy at RBS Greenwich Capital in Greenwich, Conn., said the moves Wednesday follow the jump in yields last week and as investors prepare for the government employment report due Friday. Were the market not taking a broader view, he said, movements in Treasurys might be more pronounced given a move higher in stocks and the ISM report. "If anything I would call this kind of action consolidating," he said. "We're still respecting the better levels that we have seen over the last few days. To me it's what we call choppy and backing and filling." The benchmark 10-year note fell 21/32 to 99 7/32 and yielded 3.97 percent, up from 3.89 percent late Tuesday. The 30-year long bond fell 1 8/32 to 94 21/32 and yielded 4.71 percent, up from 4.62 percent late Tuesday. The 2-year note declined 3/32 to 100 10/32 and yielded 2.45 percent, up from 2.40 percent. In late trading, the yield on the 10-year rose to 3.98 percent; the 30-year fell to 4.70 percent; and the 2-year was unchanged at 2.45 percent. The 3-month Treasury bill's yield fell to 1.85 percent from 1.91 percent on Tuesday, and the discount rate rose to 1.82 percent from 1.88 percent. Friday's employment report from the Labor Department is being seen as a key indicator of where the economy is headed. The past four reports have shown job losses in the U.S.; a continued reduction in jobs could dent consumer spending, which accounts for more than two-thirds of U.S. economic activity. A broad slowdown could send investors scurrying for Treasurys. "Nonfarm payrolls is the big number. Maybe it's the number of a given month," Ader said. "How much do you want to rally before you have a given number under your belt?" Copyright © 2008 The Seattle Times Company
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