NEW YORK: US Treasuries prices fell slightly on Monday as investors reduced their debt holdings in advance of an auction of $26 billion in two-year notes, part of this week's $90 billion in fixed-rate coupon supply.
Shorter-dated issues have been under pressure on the notion that the Federal Reserve will raise interest rates at its policy meeting in December.
This has spurred investors to reduce their shorter-dated debt holdings in favor of longer-dated maturities, flattening the yield curve.
The selling on that rate-hike view was mitigated by buying from bargain-minded investors who saw appeal in two-year yields which approached the 5-1/2 year highs set in early November, analysts said.
Weaker-than-expected data on US home resales in October also rekindled some bids for Treasuries.
"The market is under pressure, but there has been some dip buying," said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
US bond prices initially fell with their European counterparts due to encouraging euro zone business data.
Comments on Saturday from San Francisco Federal Reserve President John Williams, who saw a "strong case" for a rate increase in December, had also pushed Treasuries prices lower.
In early trading, two-year notes were down 1/32 in price for a yield of 0.930 percent, up 2 basis points from late on Friday. It reached 0.958 percent on Nov. 6, which was the highest since May 2010, according to Reuters data.
Benchmark 10-year notes were down 3/32 to yield 2.275 percent, up 1 basis point from Friday.
The yield on the 30-year bond was marginally higher at 3.025 percent, holding 1.31 percentage point premium above the five-year note.
This was the slimmest differential between the five-year and 30-year yields since August.
At 1 p.m. (1800 GMT), the Treasury will offer $26 billion in two-year notes, followed by a $35 billion sale of five-year notes on Tuesday and a $29 billion auction of seven-year debt on Wednesday.
In the "when-issued" market, traders expected the latest two-year supply to fetch a yield of 0.952 percent, which would be the highest yield at a two-year auction since April 2010, which it cleared at 1.024 percent.