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Bond rally ends on profit-taking, data caution

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US 3-MO
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US 1-YR
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US 10-YR
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US 30-YR
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U.S. Treasurys ended a six-session rally on Monday, with prices surrendering early gains and turning down on profit-taking ahead of Friday's key U.S. unemployment report.

A credit downgrade of Japan had fueled early gains in Treasuries on Monday, threatening to extend the rally, which has been built on falling oil prices and concerns about global growth. Brent oil prices sank to five-year lows before recovering to gain 3.3 percent.

Traders attributed the move to profit-taking, after several days of gains and a strong November, ahead of market-moving data including U.S. auto sales, service-sector sentiment and Friday's November jobs report.

Prices of 30-year debt swung widely, with yields ranging from a low of 2.876 percent at the start of U.S. trading to a high of 2.95 percent.

The long bond last yielded 2.95 percent, reflecting a price decline of 1 3/32, according to Reuters data.

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In November, long-dated U.S. Treasurys bonds posted strong returns, up nearly 3 percent, beating the Standard & Poor's 500's 2.45 percent. Barclays' 20+ year Treasuries index has risen 23.5 percent year-to-date vs S&P's 11.9 percent.

"We have had a pretty good run-up," said David Coard, head of fixed-income trading at Williams Capital Group in New York. "That often results in people taking profits, or they might think Treasuries are a little rich and may be selling short."

Investors were also anxiously eyeing Friday's monthly U.S. jobless report. Economists polled by Reuters see a November jobless rate of 5.8 percent, unchanged from October.

The benchmark 10-year Treasury note was last off 14/32 and yielding 2.22 percent versus 2.196 percent on Friday.

Yields on the 10-year had been as low as 2.15 percent before the release of ISM data showing a slowdown in America's manufacturing sector in November.

German manufacturing activity shrank in November at the fastest rate in 17 months, a survey showed, and Moody's Investors Service downgraded Japan's sovereign debt by one notch to A1.