U.S. Treasurys fell in price Monday, as outlooks for stronger growth and higher interest rates in 2011 drew investors to riskier assets at the expense of safe-haven U.S. government debt.
Government data released late last week suggested stronger-than-expected economic growth in the fourth quarter and easing deflation risk.
"A number of banks and securities dealers have forecasted significantly higher rates for next year and that has led to higher yields," said Thomas di Galoma, head of fixed-income rates trading at Guggenheim Securities in New York.
Bond dealers sold Treasurys to lock in yields on the corporate bonds they will underwrite this week, and strength in U.S. stock index futures also weighed on Treasurys prices.
U.S. stock index futures rose after China held interest rates steady over the weekend despite high inflation pressure.
The benchmark U.S. 10-year Treasury note yield briefly pushed above 3.375 percent.
That constituted a nearly two-thirds retracement of its May-to-December move, di Galoma said.
In morning trade, the 10-year Treasury note was down 9/32, its yield at 3.364 percent.
"The focus this week will be limited liquidity because of year-end and the FOMC meeting tomorrow," Di Galoma said.
Treasury yields are in a swirl of cross-currents a day ahead of the Federal Reserve's December policy meeting. The U.S. central bank's $600 billion stimulus plan was supposed to lower interest rates. But President Barack Obama's tax deal with Republicans has pushed yields higher because it will likely stimulate economic growth.
Benchmark U.S. yields are now at six-month highs.
Meanwhile, the Fed will continue to support the Treasury market. The New York Fed said Friday the Fed will purchase about $105 billion of Treasury and Treasury inflation-protected securities in 18 operations from Dec. 13 through Jan. 11.
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