Prices of U.S. government debt fell on Tuesday as stronger-than-forecast economic data and a delay in any lack of action against Syria as U.S. President Barack Obama marshals congressional backing for a military strike prompted investors to sell Treasurys.
"The unwinding of some safe-haven activity related to Syria followed the weekend news that President Obama would seek congressional authorization for a military strike," said John Canavan, fixed-income analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.
In addition, after some traders had covered their short positions ahead of the three-day holiday weekend, on Tuesday "they were prepared to put those short positions on again," he said, weighing on bond prices.
Surprisingly strong U.S. manufacturing data, following similarly strong data from Europe and China on Monday when U.S. financial markets were shut for the Labor Day holiday, encouraged more selling, temporarily sending benchmark yields close to the two-year highs set about 1-1/2 weeks ago.
When those levels brought no more selling, "that attracted a little bit of a short-covering bounce," Canavan said. "Prices ended quite a bit lower on the day, but above the earlier lows."
Stronger economic numbers make it more likely that the Federal Reserve, which will hold its next policy meeting on Sept. 17-18, will gradually remove monetary stimulus, primarily by cutting back on large-scale bond purchases.
U.S. benchmark 10-year Treasury notes slipped 22/32 in price. Their yields, which move inversely to price, rose to 2.87 percent from 2.79 percent on Friday.
The 10-year yield rose as high as 2.902 percent, about 3 basis points below a 25-month high recorded on Aug. 22, according to Reuters data.
The 30-year bond fell to 97 in price. Its yield rose to 3.79 percent from 3.70 percent at Friday's close.
Among shorter-maturities, the two-year note was on track to close at its highest yield since July 2011. It last traded at 0.418 percent, up from 0.403 percent on Friday.