Long-term Treasurys took a fall after a national survey showed U.S. manufacturers expanding at a quick clip.
The Institute for Supply Management said Monday that its main index rose to 56.9 in October, buoyed by both strong orders and production. That's better than the reading of 54 economists expected and September's 54.4.
A showing above 50 on the ISM index signals that manufacturers are expanding their business. Encouraging economic reports often knock down Treasurys, as investors sell their safest bonds for other investments.
The 30-year note dropped after the ISM report was released, then made up lost ground throughout the day. By late afternoon, the long bond lost 46.8 cents on the day to trade at $97.50. That nudged the yield to 4.01 percent from 3.98 late Friday, as bond yields and prices move in opposite directions.
The note maturing in 2020 slipped 25 cents to $99.87. The lower price raised the yield on the 10-year note from 2.60 percent to 2.63 percent.
Traders say any selling pressure is likely to be muted until the Federal Reserve's meeting on Wednesday. That's when the Fed is expected to announce details of a new program aimed at lifting the economy through buying Treasury bonds.
The Fed tried a similar effort in the depth of the financial crisis, buying $1.7 trillion in mostly mortgage bonds. Starting in August, the central bank has been taking the cash it receives when these mortgage bonds expire and rolls them into Treasurys.
As part of that effort, the Fed reported that it bought $2.48 billion in Treasurys on Monday, picking up bonds maturing between 2013 and 2014.
In late afternoon trading, Treasurys with shorter maturities were mostly flat. The two-year note traded at 0.35 percent, versus 0.34 percent late Friday. The three-month T-bill paid a 0.12 percent yield at a discount of 0.13 percent.