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US Treasurys fall in light trading, retail sales next focus

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U.S. Treasury debt prices ended lower on Monday on light summer volume, with bond yields staying in a tight range ahead of Tuesday's release of the government's report on retail sales.

Traders have been scouring for signs of a strengthening recovery, with most expecting the Federal Reserve will start reducing its $85 billion monthly bond purchases in September if data shows the economy is gaining traction.

"With people expecting the Fed to buy less bonds, you are getting a weakening in both bonds and stocks," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago.

In the near term, Tuesday's retail sales report will be watched for signs over the strength of consumer spending, which accounts for two-thirds of the U.S. economy.

Economists polled by Reuters forecast retail sales likely grew 0.3 percent in July after a 0.4 percent increase in June.

The most important data in coming weeks, however, and potentially the only one that might alter the Fed's course, will be the release of the August jobs data on Sept. 6, before the Fed's Sept. 17-18 meeting.

(Read more: GDP growth questioned as data misses)

Treasurys yields held on Monday in the middle of a range they have traded in since the beginning of July.

Benchmark 10-year notes were down 7/32 in price to yield 2.605 percent, up 2.5 basis points from late on Friday. The 10-year yield has retreated from a two-year high of 2.755 percent on July 8, but up from the bottom of the recent range of 2.46 percent on July 17.

The bond market tipped into negative territory after gaining earlier due to news Japan recorded weaker-than-expected 0.6 percent growth in the second quarter, with traders also preparing for the Fed's nearly daily bond purchase.

The Fed on Monday bought $1.496 billion in debt due from 2036 to 2043 as part of its ongoing purchase program.

—By Reuters

US Treasury yields

Symbol
Yield
 
Change
US 1-MO
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US 3-MO
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US 6-MO
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US 1-YR
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US 2-YR
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US 3-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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