NEW YORK (CNN/Money) - Safe-haven Treasurys were savaged on Thursday after a surprisingly strong survey of U.S. industry sent investors scurrying into riskier investments like equities.

Analysts were quick to caution the survey was inconsistent with other data showing a struggling economy, but its timing could not have been worse for a Treasury market that had climbed higher on safety concerns during the holidays.

With many investors long on paper and trading conditions still wafer thin, a stampede to cut positions resulted in a vicious mark-down of prices well beyond what the data alone would have justified.

The benchmark 10-year note yield suffered its biggest one-day rise since the LTCM hedge-fund crisis of October 1998, while the two-year yield leaped to 1.80 percent, just days after it touched record lows around 1.55 percent.

Around 4:00 p.m. ET, 10-year notes lost 1-28/32 to 99-19/32 , bringing their yield to 4.05 percent, while the 30-year bond fell 3-2/32 to 106-1/32, yielding 4.97 percent. Yields move in the opposite direction from prices.

The two-year note fell 13/32 of a point to 99-29/32 with a yield of 1.80 percent, after finishing at 1.59 percent on Tuesday. The five-year note slid 1-6/32 to 100-1/32, yielding 2.99 percent.

Meanwhile, the dollar jumped back from recent multiyear lows after a rout at the end of 2002. The euro slipped to $1.04 from $1.05 Tuesday, and the dollar bought ¥120, up from ¥118.77 Tuesday.

The market was closed Wednesday, New Year's Day.

"The market had got a bit overblown in the last couple of weeks, and the data let a lot of that air out," said Ifty Islam, head of fixed income strategy at Deutsche Bank Securities.

"But equally the selloff itself is an overreaction to the figures; the economic backdrop is still one of weakness for some time to come," he added. "With the 10-year above 4.00 percent, I would be inclined to buy here."

The factory data came as a rude shock for bond investors who had thought the risks were to the downside after a string of soft regional surveys.

Instead, the Institute for Supply Management's index of national manufacturing jumped to 54.7 in December from 49.2 the month before, well above analysts' forecasts of 50.1.

The breakdown was also robust, with the new orders index -- considered an important leading indicator of future activity -- bounding to 63.3 from 49.9.

"You look at all of the components, and they are all pretty shocking in terms of the magnitude of the increase, especially with the new orders being well above 60," said John Nyhoff, vice president at Bank of Tokyo-Mitsubishi Futures in Chicago.

"It certainly means that perhaps manufacturing is going to do a little bit better than most people would have guessed."

Indeed, so strong were the numbers that the ISM itself cautioned against reading too much into a single report, saying the scale of the gain was difficult to explain.

That did not stop the futures market from revising up the chance of a Federal Reserve policy tightening later this year.  

-- from staff and wire reports