Ten year U.S. Treasuries fell on Monday despite new manufacturing and construction data which reinforces concerns that the Federal Reserve may cut lending costs.

Ten year treasury notes fell 7/32 to yield 3.545 at 3:40 p.m. in New York. Traders in Fed funds futures contracts are betting that the Federal Reserve will cut interest rates by 0.75 percentage points to give the economy a boost in light of an economic slowdown which is on the verge of recession.

Oil and gold futures trading sent those commodities to record highs as investors sought safe haven investments from a falling dollar and diving stocks. The Two year note was unchanged, with a yield of 1.627.

A nationwide manufacturing report released today showed that the sector shrunk in February compared to the previous month, the most since 1994. The Institute for Supply Management s

Meanwhile a manufacturing report from the Institute for Supply Management reported that factory work contracted the most in five years and construction spending dropped the by its largest amount since 1994. The ISM factory index fell to 48.3 in February from 50.7 last in January. Figures below 50 indicate shrinking activity.

In a separate announcement, the Commerce Department reported construction spending fell by the most in 14 years, dropping 1.7 percent.