NEW YORK: US Treasury debt yields rose to one-week highs on Monday after data showed US manufacturing activity rebounded in May and construction spending improved, suggesting the world's largest economy was on a more steady path to recovery after a soft patch in the first quarter.
Treasury debt prices, which move inversely to yields, were also weighed down by profit-taking and unwinding of month-end demand as investors braced for a spate of economic data this week that could provide further clues about the timing of a Federal Reserve rate hike.
The Institute for Supply Management said its index of national factory activity rose to 52.8 in May, from April's 51.5. The ISM number topped expectations of 52.0, according to a Reuters poll of economists.
Another report showed that US construction spending surged in April to the highest in nearly 6-1/2 years as outlays increased broadly.
"We had some numbers today that probably had little a bit more strength to them than what the market was expecting and that has caused this selloff," said David Coard, head of fixed income sales and trading at Williams Capital in New York.
"Those reports may be coloring expectations about Friday's US employment report." Economists are expecting a total of 225,000 jobs created in May, according to a Reuters poll.
Monday's data, however, did not change market expectations that the Fed was likely to raise interest rates in September, analysts said.
"For a rate hike to happen earlier than September, we probably have to have an unbelievably big jobs number this Friday, and that's highly unlikely," said Coard. In late trading, US 30-year Treasuries were last down more than 2 points in price to yield 2.948 percent, from a yield of 2.885 percent late Friday.
The 30-year yield hit a high of 2.959 percent, the highest since May 26. US 10-year notes fell 26/32 in price to yield 2.188 percent, from a yield of 2.123 percent late Friday. Monday's high was 2.199 percent, also a one-week peak.
Boston Fed President Eric Rosengren, who is not a voting member of the Federal Open Market Committee, sounded a dovish tone on Monday. He said he would like to begin raising rates as soon as possible, but noted risks from the slowdown in China and Europe loom large even as US growth is still not strong enough.
Treasuries showed little reaction to Rosengren's remarks.
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