Treasuries fell as service-industry growth fueled speculation the Federal Reserve will taper stimulus earlier than expected, while oil slid on forecasts for growth in inventories. U.S. shares dropped and European stocks retreated as the growth outlook for the euro region was trimmed.
Treasury 10-year notes fell for the fourth time in five days as the U.S. services sector grew faster than forecast last month, underpinning speculation the Federal Reserve may move up the timing of asset-purchase cuts.
The U.S. Treasury Department will sell $10 billion to $15 billion of its first floating-rate notes Jan. 29 and said a period of political wrangling over the budget requires a delay in plans to reduce coupon auctions.
U.S. government bonds are acting more like equities than any time since before the credit crisis, making Treasuries a hidden risk to investors becalmed by the prospect of the Federal Reserve prolonging stimulus into 2014.
Treasuries rose for a second week as U.S. job growth below forecast for a third month added to speculation the economic recovery is too slow for the Federal Reserve to begin reducing asset purchases this year.
Financial conditions improved to the strongest level since August as Republican and Democratic congressional leaders worked on a short-term budget agreement that diminishes the risk of a government debt default next week.
Relative yields on U.S. government- backed mortgage bonds are at about the lowest in almost five months as Federal Reserve Chairman Ben S. Bernanke proves more important to the market than Tea Party politicians.