NEW YORK: US Treasury yields rose to one-and-a-half week highs as investors looked ahead to Friday's highly anticipated employment report for further clues on when the Federal Reserve is likely to raise interest rates, with no major new data due on Tuesday.
Richmond Federal Reserve President Jeffrey Lacker, who is not a voting member of the Fed's rate-setting committee, on Tuesday said there was a strong case for raising interest rates, arguing that borrowing costs might need to rise significantly to keep inflation under control.
Yields also rose on Monday after data showed US factories ramped up activity in September, with the sector now expanding, boosting confidence in the economy.
Investors will be focused on whether August's weaker than expected 151,000 jobs gains will be revised upward when the labor data is released on Friday.
"The market is anticipating that it will be revised up for the August number," said Lou Brien, a market strategist at DRW Trading in Chicago.
Employers are expected to have added 175,000 jobs in September, according to the median estimate of 100 economists polled by Reuters.
Benchmark 10-year notes were last down 4/32 in price to yield 1.64 percent, the highest since Sept. 22.
A speech by Fed Chair Janet Yellen on Oct. 14 at an economic conference at the Boston Fed will then be closely watched for any signals that a rate hike is pending.
"I think the most important thing in the next couple of weeks is Yellen's speech at the Boston Fed economics conference," said Brien, noting the conference was used by former Fed Chair Ben Bernanke in 2010 to indicate a new round of stimulus was coming.
It may be Yellen's last chance to indicate if a rate increase is likely at the central bank's November meeting.
Traders are currently pricing in only an 11 percent chance that the Fed will raise rates in November, and a 62 percent chance of an increase in December, according to the CME Group's FedWatch Tool.
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