U.S. bonds gain on weak economic data, tumbling crude

The U.S. Treasuries strengthened Tuesday after the data showed weaker-than-expected ISM manufacturing and construction spending. Also, tumbling crude oil prices drove investors towards safe-haven assets. The yield on the benchmark 10-year bonds fell 2.36 pct to 1.819 pct and the yields on 2-year bonds tumbled 4.04 pct to 0.762 pct by 1155 GMT.

The final Markit US manufacturing PMI reading decreased to 50.8 for April, as compared to 51.4 in March. This comes in alongside market expectations for a 50.8 result. The March US Commerce Department construction spending report revealed a 0.3 pct m/m increase, versus the revised 1.0 pct m/m reading seen in February, from previous down 0.5 pct m/m, just below expectations for a 0.5 pct m/m increase.

Federal Reserve Bank of Atlanta President Dennis Lockhart (non-voter) said that Fed will know relatively little about Q2 by the June FOMC and thinks remaining 3 quarters will show a rebound in GDP. He further added that June is still alive and would put more probability on June than the market is pricing in. April statement positioned Fed well and retains the options of moving in June but acknowledging uncertain events like Brexit and it is too soon to say whether Fed is seeing needed inflation progress, he added.

Today, crude oil prices tumbled by snapping 6-month high as rising production in the Middle East outweighed a decline in U.S. output and a recent slide in the dollar, which has been supporting crude. OPEC supplies rose to 32.64 million barrels per day in April, from 32.47 million barrels per day in March, according to a Reuters survey. That almost matches January's 32.65 million barrel per day, when Indonesia's return to OPEC boosted production to the highest since at least 1997. The International benchmark Brent futures fell 0.59 pct to $45.56 and West Texas Intermediate (WTI) tumbled 0.85 pct to $44.40 by 1225 GMT.

The markets in the United States will now focus FOMC Member Mester speech in an attempt to estimate the Fed's likely next step to raise interest rate. Meanwhile, S&P 500 Futures fell 0.67 pct to 2,060.25 by 1225 GMT.