U.S. Treasury debt yields rose across the board on Tuesday on growing expectations the Federal Reserve could change the language in its next monetary policy statement to flag a possible rate increase as early as June.
U.S. 30-year bond and 10-year note yields climbed to seven-week peaks on reports that Greece intends to ask for an extension of a loan agreement tomorrow, sources with knowledge of the matter told Reuters.
Yields on U.S. 7-year and 5-year notes also touched their highest levels since early January. With the latest sell-off on Tuesday, Treasurys will effectively have given back all of their monster gains in January, when the Merrill Treasury index gained 2.8 percent in its best month since the crisis days in December 2008.
Tuesday's decline will bring losses for the month so far to more than 2 percent, putting Treasuries on track for their worst month since either December 2009 or January 2009, depending on index weights.
Treasurys sold off as well on news Greece intends to ask for an extension of its loan agreement with the euro zone on Wednesday. That loan is separate from the country's full bailout program.
"There's speculation that there would be some upbeat tone in the minutes tomorrow and that might suggest (Fed Chair) Janet Yellen might take that stance at her congressional testimony next week," said Kim Rupert, managing director of global fixed income at Action Economics in San Francisco.
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"That would potentially lay the ground work for the Fed to remove 'patience' in its statement at the March meeting. That, in turn, could signal that they're ready to hike rates by June."
The Fed will release the minutes of its latest meeting on Wednesday, and market participants are awaiting to see the Fed's stance on the economy and interest rates. Philadelphia Fed President Charles Plosser, who is not a voting member of the Federal Open Market Committee, said on Tuesday a 1-1.5 percent fed funds rate at the end of 2015 was reasonable.
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In late New York trading, U.S. 30-year bond prices fell more than 2 points to yield 2.738 percent. Earlier, U.S. 30-year yields rose as high as 2.747 percent, the highest since Jan. 2.
Benchmark 10-year notes were down more than a point in price to yield 2.148 percent, up from 2.054 percent late on Monday. U.S. 10-year yields rose as high as 2.152 percent. Concerns about Greece's debt negotiations and the conflict in Ukraine had triggered earlier safe-haven buying of Treasuries, but that dissipated in New York trading.