US Treasury prices ended higher on Tuesday after stocks fell to their lowest levels since July, increasing demand for safe-haven assets as uncertainty over next week's US presidential election weighed on investor sentiment. The S&P 500 stock index dropped below 2,100 to its lowest level since July 7, when markets were roiled by Britain's vote the prior month to leave the European Union.
"Because the S&P got under 2,100 it got some people's attention," said Lou Brien, market strategist at DRW Trading in Chicago.
Bonds have received a safety bid this week on expectations of a tighter US election as Donald Trump gains in some election polls.
Benchmark 10-year notes ended up 4/32 in price to yield 1.83 percent. The move overturned earlier bond weakness as investors raised their global inflation outlook following strong Chinese data, and after central bank meetings in Japan and Australia on Tuesday went as expected.
"Part of it was the better-than-expected Chinese manufacturing data and getting through the first two central banks for the week without any sort of surprises," said Mike Lorizio, a senior fixed income trader at Manulife Asset Management in Boston.
China's manufacturing sector expanded at the fastest pace in more than two years in October thanks to a construction boom.
Ten-year note yields rose as high as 1.879 percent earlier on Tuesday, the highest level since May 31.
Early bond weakness was also contained by falling risk sentiment as stock and oil prices steadily declined.
US data also showed that US factory activity increased for a second straight month in October, though a gauge of new orders slipped to a reading of 52.1 from 55.1 in September, suggesting any future gains in manufacturing activity would be modest.
"The market was a bit disappointed with data then the oil selloff and the performance of risk assets has helped lend itself to be a little bit supportive of the entire Treasury curve," said Lorizio.
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