Treasurys retreated as investors decided the market had gone too far too fast even given the growing prospect of further interest rate cuts from the Federal Reserve.
Not that market conditions had gotten any better. Lending conditions remained challenging at best, and interbank borrowing rates in Europe set fresh multi-year highs.
Financial companies also continued to take a drubbing on Wall Street after JP Morgan cut its estimates on key industry players.
But in the end, bonds had already taken such developments into account. Barring a further deterioration in the actual performance of the overall economy, such as a negative reading in Friday's payrolls report, bond yields seemed a bit low to some.
"Some people are thinking that Treasurys are a little rich here," said David Coard, head of fixed-income sales and trading at The Williams Capital Group.
"Payrolls will be very important, because it will solidify where the probability should be of a Fed move of 25 basis points or 50 basis points, because that's what we're talking about now."
As conviction in the possibility of a more aggressive move wavered, benchmark 10-year notes lost half a point in price and were offering a yield of 3.92 percent, up seven basis points but still not too far from a 2-1/2 year low set last week. The two-year debt was at 2.92 percent.
Losses deepened after the stock market pared early losses.
The decline in bond prices did not alter the increasingly steeper shape of the yield curve. The spread between 10- and two-year notes was hovering around a full percentage point for the first time in about three years.