U.S. Treasurys prices fell on Thursday with benchmark yields rising near two-year highs as encouraging readings on jobs and factory activity supported the view the Federal Reserve will dial back its bond purchases sooner rather than later.
Reports showing jobless claims falling to a 5-1/2-year low last week and growth in manufacturing activity to a two-year peak lifted investor expectations for a possible strong July payrolls report due early Friday.
A monthly rise in hiring in the 200,000 area, analysts say, should keep the Fed on track to start to pare its $85 billion purchases in Treasurys and mortgage-backed securities, perhaps at its September 17-18 meeting.
"The tapering theme is front and center still," said Eric Green, global head of rates and currency research at TD Securities in New York. "The market is priced for a 200,000 increase in payrolls and maybe even a bit more."
The consensus forecast for overall U.S. hiring in July among economists polled by Reuters was 184,000, down from 195,000 in June. The unemployment rate likely dipped to 7.5 percent last month from 7.6 percent.
(Read more: July layoffs drop 4.2%: Challenger)
The economy has managed this level of job growth since spring, even though the pace of expansion was a rather anemic 1.7 percent in the second quarter.