(Recasts, updates yields, adds analyst comments) By Karen Pierog CHICAGO, Sept 1 (Reuters) - U.S. Treasury yields ticked higher on Tuesday after data showed the country's manufacturing activity accelerated to a more than 1-1/2 year high in August. The benchmark 10-year yield was last up 2.3 basis points at 0.7163%. The Institute for Supply Management (ISM) said on Tuesday its index of national factory activity increased to a reading of 56.0 last month from 54.2 in July. That was the highest level since January 2019 and marked three straight months of growth. A reading above 50 indicates an expansion in manufacturing. It followed data out of China and Europe that showed an uptick in manufacturing last month. Andrew Richman, senior fixed income strategist at Sterling Capital Management, said the data helped boost yields, which jumped last week after the U.S. Federal Reserve's announcement of a new policy framework involving higher inflation. "It's all about inflation expectations, which have risen a little bit here from where they were," he said. Kim Rupert, senior economist at Action Economics in San Francisco, said that the Treasury market was consolidative after yields fell on Monday largely due to a big month-end duration index extension. "There's still an underlying bid in the market because the Fed is going to maintain its zero-rate posture," Rupert said. Looming large this week is Friday's release of August employment data, which could shed light on the pace of the economic recovery. The two-year U.S. Treasury yield, which typically moves in step with interest rate expectations, was last up less than a basis point at 0.1368%. A closely watched part of the U.S. Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, which is viewed as an indicator of economic expectations, was last at 57.60 basis points, less than a basis point higher than at Monday's close. September 1 Tuesday 10:47 AM New York / 1447 GMT Price Current Net Yield % Change (bps) Three-month bills 0.105 0.1068 -0.005 Six-month bills 0.115 0.1167 -0.002 Two-year note 99-250/256 0.1368 0.006 Three-year note 99-234/256 0.1542 0.008 Five-year note 99-226/256 0.2736 0.011 Seven-year note 100-8/256 0.4954 0.013 10-year note 99-32/256 0.7163 0.023 20-year bond 97-152/256 1.2618 0.034 30-year bond 97-48/256 1.4918 0.040 DOLLAR SWAP SPREADS Last (bps) Net Change (bps) U.S. 2-year dollar swap 8.50 0.00 spread U.S. 3-year dollar swap 8.00 -0.50 spread U.S. 5-year dollar swap 6.25 -0.25 spread U.S. 10-year dollar swap 0.25 0.00 spread U.S. 30-year dollar swap -38.00 0.25 spread (Reporting by Karen Pierog Editing by Chizu Nomiyama)
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source: reuters.com