US Treasuries lost further ground on Wednesday despite good demand for new government debt as concerns about stronger economic data ahead kept would-be buyers from dipping their toes in the market.
In when-issued trade, yields on the $26 billion of new two-year notes climbed as high as 2.35 percent, the highest level in one and a half years.
The notes were sold at a high yield of 2.27 percent and drew bids for 2.11 times the amount on offer, short of the 2.18 achieved at last month's auction but above the 1.90 average of 2003.
Indirect bidders, which include customers of primary dealers and foreign central banks, picked up 40.8 percent of the issue, or $10.60 billion.
That was just short of March's 43.5 percent, easing concerns that offshore central banks might cut back purchases of US debt.
"There seem to be all the elements of a good auction, the bid-to-cover ratio was solid, the yield was as expected and yields are not rising," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co. "There are still lingering worries about lots of issues."
Perhaps most troublesome for bonds is the prospect that data on economic growth and jobs will continue to surpass expectations.
The current two-year note lost 7/32 in price, edging its yield up to 2.26 percent from 2.15 percent late Tuesday. Yields on the five-year note rose to 3.62 percent from 3.49 percent.
The benchmark 10-year note lost 28/32 in price, taking its yield to 4.50 percent - the highest closing level since September - from 4.39 percent.
The 30-year bond slid 1-7/32, lifting its yield to 5.29 percent from 5.20 percent.
Crescenzi said the market was also worried that China's renewed effort to prevent its economy from overheating could be accompanied by reduced demand for Treasuries from the Asian giant.
"There's some evidence that they may be shifting away from dollar reserves to other assets to try to diversify their reserves," Crescenzi said.
Traders also remained on the defensive ahead of Thursday's US gross domestic product report for the first quarter.
Analysts expect GDP growth to hit a whopping 5.0 percent annualised in the first quarter, up from 4.1 percent the quarter before, but forecasts stretch as high as 6.0 percent.