U.S. government bonds fell as investors weighed the impact of turmoil in Europe and a mass shooting in Las Vegas against strong economic data and prospects for a tax overhaul.
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The yield on the benchmark 10-year Treasury note fluctuated throughout the day before rising to 2.337%, from 2.328% Friday. The yield, which rises as bond prices fall, has lost ground only twice in the last 16 trading days.
Yields spiked after the Institute for Supply Management reported that manufacturing activity in the U.S. reached a 13-year high in September, as strong demand and order growth rode out a severe hurricane season.
Some investors also sold bonds on speculation that President Donald Trump may soon name a successor to Federal Reserve Chairwoman Janet Yellen, who could guide the Fed to remove stimulus and raise interest rates more quickly than called for under current plans.
Any new Fed leader considered by Trump "is probably going to be viewed as somewhat hawkish compared with Yellen," said Thomas di Galoma, head of Treasury trading at Seaport Global Holdings.
Yields had risen as high as 2.371% in overseas trading on momentum stemming from the Republican tax plan, which could stimulate growth and lead to bigger budget deficits, though some investors continue to harbor doubts about the likelihood of a tax overhaul passing.
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Politics outside the U.S. also spurred demand for government debt. Voters in the Spanish province of Catalonia voted by an overwhelming majority to secede in a referendum that the central government in Madrid had outlawed as unconstitutional. The turnout represented about 40% of eligible voters in the region, with many opponents opting to boycott the vote.
Investors had viewed Spain as having made significant economic progress after losing favor at the nadir of the European debt crisis. The secession issue is also problematic for other European Union members, as many worry that the Catalan vote may encourage similar movements elsewhere.
"It sets up these political considerations that are outside of what the market" typically knows how to value, said Aaron Kohli, an interest-rate strategist at BMO Capital Markets. "It's not clear what the implications of this really are."
Investors also were cautious as reports of a mass shooting in Las Vegas, where at least 58 people were killed and more than 500 wounded, fueled demand for Treasurys.
(END) Dow Jones Newswires
October 02, 2017 16:44 ET (20:44 GMT)