US Treasuries prices declined on Monday after a veritable chorus of remarks by top Federal Reserve officials suggesting a possible year-end rate increase and an upcoming wave of new bond supply spurred traders to reduce holdings. On Friday, short-to-medium US yields fell to three-week lows on bets the Fed may not raise interest rates until 2016, a day after the Fed left rates near zero due to global risks and recent market turmoil.
Three regional Fed presidents - James Bullard of St. Louis, Dennis Lockhart of Atlanta and John Williams of San Francisco - all made comments indicating a rate hike remains on the table.
"They are on a communication offensive. They want to keep every meeting priced in. They don't want the market to get carried away," said Gennadiy Goldberg, interest rates strategist TD Securities at New York.
On Monday, Bullard told CNBC television there was "a powerful case to be made" for beginning to tighten policy due to an improving domestic economy.
Lockhart, who voted to keep rates unchanged last week, said on Monday he still expected a rate increase later this year.
On Sunday, Williams told Fox News that last week's decision to hold rates unchanged was a "close call."
Interest rates futures implied traders see a 41 percent chance the Fed will raise rates at its December meeting, up from 37 percent on Friday, according to CME Group's FedWatch program.
The rethinking on the timing of a Fed rate hike came as investors will face $90 billion worth of fixed-rate Treasuries supply, starting with a $26 billion auction of new two-year notes on Tuesday.
In addition, US companies are expected to sell $25 billion to $30 billion in investment-grade bonds this week, according to IFR, a unit of Thomson Reuters.
An initial bounce in the US stocks stoked an unwinding of safe-haven positions in Treasuries, before gains in equities faded led by weakness in the biotech sector.
On the open market, benchmark 10-year Treasuries notes were down 23/32 in price, yielding 2.214 percent, up 8 basis points from late on Friday.
Two-year notes were down 2/32 in price for a yield of 0.714 percent, up nearly 4 basis points from Friday, while the 30-year bond was down 2 points in price to yield 3.035 percent, up over 10 basis points on the day.
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