U.S. Treasurys prices fell on Wednesday as investors saw a Western strike against Syria as less likely, with yields on short- to medium-term debt hitting two-year highs on speculation about when the Fed might tighten policy.
Strong auto sales data also helped pull investors into equities and away from safe-haven assets such as U.S. Treasurys.
Prices for benchmark 10-year notes and 30-year bonds pared early gains to turn negative as equities advanced.
"The bond market did see some flight to quality last week when there was more tension regarding Syria," said Kim Rupert, managing director of fixed-income analysis at Action Economics in San Francisco.
"But the fact that the U.S. has delayed on a strike has unwound some of the safe-haven buying and has given equities a leg higher," she added.
Trading in longer-dated debt has been recently volatile on views the U.S. Federal Reserve could slow its asset-buying program soon.
But short-to-medium-term yields surged on Wednesday to their highest since July 2011 on speculation over the timing of the Fed's first rate increase.
"The market is adjusting to the idea that low rates are not going to be here forever," said Thomas Roth, executive director of U.S. government bond trading at Mitsubishi UFJ Securities USA in New York.
The yield on two-year Treasurys last traded at 0.462 percent, from 0.418 percent late on Tuesday, while the yield on five-year notes was 1.737 percent, compared to 1.682 percent late on Tuesday.
Investors were also looking to Friday's nonfarm payrolls data for August, which will help guide the Federal Reserve's decision on when to slow its $85 billion per month in buying of Treasurys and mortgage-backed securities.
"The Fed is on track to taper in a couple of weeks, barring a big downside surprise on non-farm payrolls," said Robert Tipp, chief investment strategist with Prudential Fixed Income in Newark, New Jersey.
Benchmark 10-year Treasury notes dipped 9/32 in price to yield 2.895 percent, from 2.863 percent late Tuesday.
The 30-year bond slid 5/32 in price to yield 3.802 percent, compared to 3.793 percent late on Tuesday.
Economists polled by Reuters forecast U.S. employers added 180,000 jobs in August, leaving the unemployment rate unchanged from July at 7.4 percent, the lowest since December 2008.
The Fed's next policy meeting will be on Sept. 17-18.
Other recent data suggested the U.S. economy, while still growing, has slowed due to sluggish global demand and a spike in mortgage rates.
The government reported the U.S. trade gap grew a tad more than expected in July as exports slipped after contributing to a huge contraction in the deficit in June.