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Treasury Department auctions $24 billion of 3-year notes at a high yield of 1.050%

U.S. Treasury debt prices fell on Tuesday, bumping benchmark 10-year yields above 2 percent for the first time in a month as investors positioned for a probable rate hike by the Federal Reserve and big government bond auctions.

The Treasury Department auctioned $24 billion in three-year notes at a high yield of 1.050 percent. The bid-to-cover ratio, an indicator of demand, was 3.34, compared to a recent average of 3.29.

Indirect bidders, which include major central banks, were awarded 49 percent, well above the 35 percent average. Direct bidders, which includes domestic money managers, brought 7.2 percent, versus a recent average of 18 percent.

Ten-year Treasury notes on Tuesday yielded as much as 2.016 percent, a high last seen on January 9, and were last trading at 1.997 percent, down 5/32 in price.

Thirty-year bond yields were last trading at 2.584 percent, reflecting a price decline of 21/32, after touching a session high of 2.596 percent.

The Treasury department is scheduled to auction $24 billion of 10-years on Wednesday and $16 billion of 30-years on Thursday.

"That's four consecutive down days, and we are still showing some of the hangover from the good nonfarm payrolls report on Friday," said Guy LeBas, chief fixed income strategist at Janney Montgomery Scott LLC in Philadelphia.

Symbol
Yield
 
Change
%Change
US 3-MO
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US 1-YR
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US 2-YR
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US 5-YR
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US 10-YR
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US 30-YR
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Bonds sank last week, in part because an unexpectedly strong U.S. jobs report on Friday suggested to many investors that the labor market's strength bolsters the case for the Federal Reserve to raise short-term rates sooner than later.

Shorter-term Treasuries, the securities most sensitive to Fed interest-rate shifts, were also off in price on Tuesday, according to Thomson Reuters data. Five-year notes fell 4/32 to yield 1.5071 percent.

"The front end of the curve is still pricing market expectations for the timing of the first Fed rate hike," LeBas said. "The probability has come forward."

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Treasurys on Tuesday were getting little lift from a safety bid driven by geopolitical crises such as the standoff between Greece and other euro zone countries, LeBas said.

Stock markets, including Wall Street, rose on Tuesday amid reports Greece may get six months of aid from euro zone governments.

"With 10s hovering around 2 percent, we'll see good demand, particularly from overseas investors and the domestic insurance community," LeBas said.

Read MoreGreece needs to play by the rules: France

Yields on 10-year Treasurys are up about 44 basis points in the past week, according to Thomson Reuters data.

The week continues with a fairly light data schedule Tuesday.

A reading on U.S. wholesale inventories barely rose in December, the latest suggestion that fourth-quarter growth could be revised lower.

A separate report showed U.S. small business sentiment fell in January amid worries over the near-term outlook, but a strengthening labor market should keep the economy on solid ground early in the year.

Meanwhile, concerns over the Greek debt negotiations continue to weigh on market sentiment. Speaking from Washington, German Chancellor Angela Merkel said on Monday that she was looking for a "viable recommendation" from Greece on Monday, after Prime Minister Alexis Tsipras reiterated his pledge to end Greece's current bailout arrangements. The European Central Bank has also refused Greece's request for a bridging loan to tide it over once its bailout officially ends February 28.