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I agree with the comments that it looks like a bug in SageTeX. I opened

In the file /SageMath/local/lib/python2.7/site-packages/, try replacing the line "m.update(bytearray(line,'utf8'))" with "m.update(line)". Does that fix it?

(In general this is probably not the right thing to do. I think it will work with Python 2 but not Python 3, but if your Sage is built with Python 2, the default, it could work.)