Yields rise ahead of US manufacturing data

CHICAGO: US Treasury yields rose on Tuesday ahead of the release of manufacturing data and as higher stock index futures indicated investors were still in the mood for risk.

The benchmark 10-year yield was last up 1.8 basis points at 0.7113%.

"We've got a little bit of risk appetite going on with stocks a bit firmer," said Kim Rupert, senior economist at Action Economics in San Francisco.

She added that the Treasury market was consolidative after yields fell on Monday largely due to a big month-end duration index extension.

"There's still an underlying bid in the market because the (US Federal Reserve) is going to maintain its zero-rate posture," Rupert said.

Data from the Institute for Supply Management (ISM) survey at 10 a.m. ET (1400 GMT) is likely to show US manufacturing activity expanded slightly last month after hitting a 1-1/2 year high in July.

It follows data out of China and Europe that showed an uptick in manufacturing last month.

Also looming large this week is Friday's release of August employment data, which could shed light on the pace of the economic recovery.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, was last up less than a basis point at 0.1348%.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was last at 57.30 basis points, less than a basis point higher than at Monday's close.