* Bond losses steepen after U.S. ISM manufacturing report
* Market shrugs off surprise ADP private sector jobs loss
* 10-year yields to fall below 2 pct in Q1 2011 -- B of A
(Adds trader quote, updates prices)
By Chris Reese
NEW YORK, Sept 1 (Reuters) - U.S. Treasury debt prices fell
on Wednesday as surprisingly strong manufacturing data assuaged
some concerns about the health of the global economy and raised
appetite for riskier assets.
As money flowed out of safe-haven government debt into
stocks, a steep sell-off in Treasuries pushed the 30-year
bond's price down over two points, and stocks finished up over
2.5 percent.
The key catalyst for the selling in Treasuries was an
unexpected rise in a widely watched national manufacturing
index from the Institute for Supply Management.
"With the (ISM report) not only showing a gain from July
but completely confounding the consensus of economists for a
sharp drop, all of a sudden the economic world is not coming to
an end, and that is sharpening the appetite for risk assets,"
said David Dietze, chief investment strategist at Point View
Financial Services, Summit, New Jersey.
Wednesday's economic reports go against recent U.S. housing
and employment data that suggested the pace of U.S. economic
growth continued to slow markedly.
Some analysts cited market chatter about possible
reallocation among longer-term investors into stocks and out of
government bonds.
The benchmark 10-year Treasury note lost 28/32 in price,
with its yield rising to 2.58 percent from 2.48 percent late on
Tuesday. The 30-year Treasury bond price lost 2-12/32 in price
with its yield rising to 3.65 percent from 3.52 percent.
With benchmark yields hovering near 19-month lows, trade
ranges have been comparatively wide in recent days. Last week
10-year yields dipped to 2.42 percent, the lowest since
January, 2009, and on Friday the note had its biggest
single-day sell-off in five months.
"The market was sitting at the high end of the trading
range so that makes it very vulnerable to a large amount of
volatility, which is what we have definitely been seeing over
the past week," said Mary Ann Hurley, vice president of fixed
income trading at D.A. Davidson & Co in Seattle.
Data earlier on Wednesday showing a surprise loss of U.S.
private sector jobs lent only a fleeting bid to Treasuries.
"Technically we found a range in notes and bonds and a
floor on yields," said Jim Barrett, senior market strategist
with Lind-Waldock in Chicago.
"This news just wasn't negative enough," Barrett said. "The
backdrop with the recent data has been so negative anyway so
the market is ignoring it," he added.
Following the private payrolls data, ISM said its
manufacturing index rose to 56.3 in August, beating economists'
consensus forecast for a fall to 53.0. A reading above 50
indicates expansion in the sector.
Bond prices fell despite data showing construction spending
at a 10-year low in July.
In terms of technical areas, analysts are citing the 2.67
percent area for the benchmark 10-year note's yield as price
support and between about 2.50 and 2.40 percent as a key lower
area.
However, longer term, some prominent bond analysts are
betting that benchmark yields will fall steeply from current
levels as the economy loses momentum heading into next year.
The 10-year U.S. Treasury note's yield is expected to fall
below historic lows of 2 percent in the first quarter of 2011
because of weak economic growth, Bank of America Merrill Lynch
Global Research said on Wednesday.
(Additional reporting by Chuck Mikolajczak, Richard Leong and
John Parry; Editing by Andrew Hay)