* U.S. manufacturing, construction spending rise, support yields
* Sentiment remains cautious due to Vegas shooting, Spain (Recasts, adds table, new comment, updates prices)
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 2 (Reuters) - U.S. Treasury yields rose on Monday in choppy trading, as Wall Street shares hit record highs and the dollar gained amid upbeat data on U.S. manufacturing and construction spending that backed expectations of another rate increase before the end of the year.
Yields, which move inversely to prices, fell earlier after a mass shooting in Las Vegas and political uncertainty in Europe caused by a Spanish referendum prompted investors to seek the safety of bonds.
“I think (Treasuries) buying has just petered out,” said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
“Wall Street is at record highs again and the dollar is gaining. So I think money is flowing back into stocks again and the bond market is a little bit fearful of what’s going to happen at the Federal Reserve, like if we get a more hawkish chairman and if data continues to be strong and inflation picks up such that the Fed doesn’t have much choice but to raise rates,” she added.
Analysts, however, said the overall market sentiment remained cautious, with last week’s optimism about U.S. President Donald Trump’s tax plan also fading.
“The focus is off tax reform at the moment given the political uncertainty with the Spanish referendum and the unfortunate tragedy in Las Vegas,” said rates strategist Gennadiy Goldberg of TD Securities in New York.
Violence erupted in Catalonia after residents voted 90 percent on Sunday in favor of breaking away from Spain in a referendum that the Spanish government later declared illegal.
In the United States, at least 58 people died and more than 500 were injured when a 64-year-old gunman with an arsenal of at least 10 rifles fired on a Las Vegas country music festival on Sunday in what has been the deadliest mass shooting in U.S. history.
Political tension remained palpable despite strong U.S. economic data.
The Institute for Supply Management index rose to 60.8 in September, from 58.8 in August, exceeding expectations for a reading of 58. The components of the index showed gains across the board.
U.S. construction spending also rebounded in August after two straight months of declines, boosted by increases in both private and public outlays. Construction spending rose 0.5 percent to $1.21 trillion.
In late trading, the benchmark 10-year U.S. Treasury note yield was 2.333 percent, up slightly from 2.326 percent late on Friday, while the 30-year yield rose to 2.864 percent from 2.858 percent. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Lisa Von Ahn and Chizu Nomiyama)