NEW YORK: US Treasury yields rose to three-week highs on Thursday as investors prepared for a potentially strong jobs report on Friday, which will be watched for new signals on when the Federal Reserve is likely to next raise interest rates.
Bonds have weakened since Friday, when concerns about Deutsche Bank's stability eased, reducing demand for safe-haven assets.
Expectations of a jobs report that could outpace analyst forecasts as well as a speech next week by Fed Chair Janet Yellen that may give new signals of a rate hike have made some investors wary of holding the debt.
"Markets are heading into payrolls on a more optimistic footing there is very strong selling," said Gennadiy Goldberg, interest rate strategist at TD Securities in New York.
Benchmark 10-year notes were last down 5/32 in price to yield 1.74 percent, up from 1.72 percent late on Wednesday. The yields have climbed from 1.54 percent on Friday.
The employment report is expected to show nonfarm payrolls rose by 175,000 jobs in the month, according to the median estimate of 100 economists polled by Reuters.
Investors will also focus on whether August's weaker-than-expected gain of 151,000 jobs will be revised upward.
Investors will then turn attention to Yellen's speech at a Boston Fed economics conference on Oct 14., which may be her last chance to indicate whether a rate hike is likely at the Fed's policy meeting in early November.
Traders are pricing in a low chance of a rate hike in November, though the odds have climbed to 15 percent, from 11 percent on Monday, according to the CME Group's FedWatch Tool.
Traders are also pricing in a 64 percent chance of an rate increase in December.
Treasury prices had gained earlier on Thursday after minutes showed the European Central Bank's rate setters agreed the euro zone economy needed continued monetary support when they met in September, noting underlying price growth showed no sign of recovery.
Bonds did not react to data on Thursday showing that the number of Americans filing for unemployment benefits unexpectedly fell last week to near a 43-year low, an indication of firmness in the labor market.
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