UNITED STATES bonds ceded an early gain as a Federal Reserve report failed to encourage investors to buy the securities at the lowest yields in 20 months.
Bonds slipped from their highs after the Fed said output last month dropped 0.2 per cent, twice as much as analysts expected.
The benchmark 30-year Treasury bond erased a gain or $5.63 per $1,000 bond, and was little changed, leaving its yield at 6.30 per cent.
Two-year note yields fell one basis point to 5.63 per cent.
Yesterday's industrial output report 'was bullish, but it was expected to be bullish,' Michael McGlone, a bond futures trader at Aubrey Lanston & Co, said.
US industrial output fell for the first time in five months in September as cool autumn weather reduced demand for utilities. Factory output rose.
Overall output fell 0.2 per cent last month, the Federal Reserve reported. An increase in factory output of 0.2 per cent could not offset a 5.4 per cent drop in utility output.