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US bonds fall on bets of brief federal shutdown

Bonds: U.S. Treasurys Chart

U.S. Treasurys prices fell on Tuesday, as traders reduced their safe-haven bond holdings on expectations that the first partial government shutdown in 17 years would be brief, although a funding deal seemed elusive.

The U.S. government partially shut down for the first time in 17 years on Tuesday as a standoff between President Barack Obama and congressional Republicans closed national parks and slowed everything from trade negotiations to medical research.

If Congress can agree to a new funding bill soon, the shutdown would last days rather than weeks, with relatively little impact on the world's largest economy.

"It is more about political posturing. The market has crisis fatigue," said Bret Barker, portfolio manager at TCW Group in Los Angeles.

Traders also pared their bond holdings after the Institute for Supply Management's index on U.S. manufacturing showed the sector grew at its fastest pace in 2-1/2 years.

Benchmark 10-year Treasurys notes last traded down 12/32 in price with a yield of 2.655 percent.

The 10-year yield touched its lowest level in seven weeks on Monday, spurred by last-minute safe haven bids ahead of the partial government shutdown.