US govt bonds off lows
US government bonds were off lows after a weaker-than-expected US industrial production report helped the market reverse some of its earlier losses on news that Iraq has agreed to allow UN weapons inspectors back into the country.
At 9.21 am, 10-year notes were down 3/16 yielding 3.93%, 30-year bonds were down 9/16 yielding 4.79%, and two-year notes were off 1/16 yielding 2.11%. Bills were mixed.
The Federal Reserve said US industrial output fell 0.3% in August, the first decline since Dec 2001. Analysts had predicted a 0.1% increase. Year-on-year, US industrial production in August was up a scant 0.4%. Meanwhile, US industrial capacity use slipped to 76.0% from 76.2% in July.
The report is yet another important sign that the US factory sector is slowing down and jeopardising the tenuous US economic recovery, analysts said.
Iraq has agreed to accept the unconditional return of UN weapons inspectors, United Nations Secretary General Kofi Annan said.
US stocks opened higher on the Iraq news, which also put pressure on bonds.
"I can confirm to you that I have received a letter from the Iraqi authorities conveying their decision to allow the return of the inspectors without conditions to continue their work," Annan said.
