U.S. benchmark 10-year yields scaled one-month peaks on Tuesday, as investors have started to price in the prospect of higher interest rates following recent upbeat U.S. economic data and hawkish comments from Federal Reserve officials.
Some market participants believe this year's U.S. government bond market rally, which has seen 10-year yields sink to 11-month lows, may have run its course.
This week's sale of new coupon-bearing government debt, which kicked off on Tuesday with the auction of three-year notes, also weighed on prices.
But the Fed's monetary policy meeting next week has garnered more attention. Analysts said there could be a reassessment of the timing of the first U.S. rate increase.
"The Fed's bias could likely shift to a more hawkish stance. They're a little worried about financial exuberance and a little bit of complacency in the market," said Aaron Kohli, interest rate strategist, at BNP Paribas in New York.
"I think the Fed is looking to shake that complacency next week. To that end, the market is selling off a little bit."
The most pronounced change came on Monday from the president of the St. Louis Federal Reserve Bank, James Bullard, who is a non-voter on the policy-setting Federal Open Market Committee. Bullard said falling U.S. unemployment rate, together with other encouraging economic data, could prompt him to move forward his view on when interest rates should be raised.