US Treasury debt prices retreated on Thursday as resilient manufacturing data sparked worries about more interest rate hikes from the Federal Reserve.
The session's losses took some investors by surprise, however, particularly given a tame reading in the Fed's favoured measure of inflation. That led some observers to blame the move on technical factors.
The Institute for Supply Management's November factory survey showed consistent strength, albeit slightly softer than October's reading.
Coupled with data on Wednesday showing the strongest US gross domestic product growth since early 2004, the ISM figures were enough to shift momentum in favour of bond bears.
"We're caught by the general economic strength," said David Ader, US government bond strategist at RBS Greenwich.
Through it all, talk that market research group Medley Global Advisors had issued a report arguing that the Fed would raise rates beyond current expectations also took a toll on bonds.
All of which left benchmark 10-year notes 7/32 lower in price for a yield of 4.52 percent, near their highest in two weeks and up from 4.49 percent at Wednesday's close. The break above 4.50 percent exacerbated the downturn in prices as chart-driven sellers stepped in.
Dealers also said hedging related to a $3 billion sale of commercial mortgage-backed debt was another culprit for the market's misfortunes.
And US stock indexes posted their biggest single-day gains in a month, attracting some capital away from safe-haven Treasuries.
However, the day's data were not all that unfriendly to bonds, particularly on the inflation front.
The personal consumption expenditures index excluding food and energy, or core PCE, rose a tame 0.1 percent in October, only half the gain expected by Wall Street.
The ISM report also showed a retreat in prices paid, albeit from high levels, with the survey's price index falling to 74.0 from 84.0.
But the headline figure, while showing a dip to 58.1 in November from 59.1 October, belied the sort of underlying economic strength that tends to hurt Treasuries, since it gives the central bank room to tighten monetary policy further.
Such concerns helped push five-year notes 5/32 lower for a yield of 4.45 percent from 4.42 percent. Two-year notes slipped 1/32 to yield 4.44 percent, while the 30-year bond slumped 14/32 and was yielding 4.74 percent.
Car companies were also reporting monthly results, and the news was neither great nor terrible. Sales of North American-made vehicles came in at 12.4 million annualised units, just above forecasts for 12.3 million and above October's depressed 11.37 million.
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