Buyers disappeared from the government securities market on Wednesday ahead of Friday's employment report.
In late trading in New York, the yield on the 30-year Treasury bond was unchanged at 6.67%. It had risen above 6.70% during the day. Ten-year notes yielded 5.78%, up from 5.76%, while two-year notes surged to 4.03%, up from 3.99%.
Short-term rates moved higher. The bond-equivalent yield on three-month Treasury bills rose to 3.09% from 3.08%.
Funds Rate at 3.5%
Federal funds were quoted at 3.50%, despite a reserve-adding operation by the Federal Reserve. The Fed's target for the funds rate is 3%.
Douglas Schindewolf money market economist for Smith Barney, Harris is Upham & Co., attributed the high funds rate to quarter-end balance-sheet maneuvering and to the fact that two-year and five-year Treasury notes sold last week were settled on Wednesday.
"The notes had to be paid for, and that set off a scramble for financing," he said.
John Canavan, market analyst for Stone & McCarthy Research Associates, Princeton, N.J., said trading was extremely thin.
"The lack of buyers caused the market to trend lower this close to the employment report on Friday," he said.
Economists think employment growth tailed off in June. Mr. Canavan said the market was also depressed by a Washington Post report that Democrats working on deficit-reduction legislation are considering replacing the proposed new energy tax with higher corporate income taxes.
Rising commodity prices also put pressure on bonds. The Commodity Research Bureau index - measuring futures prices on 21 commodities - rose 1.98 points, or 1%, to 207.22. Stocks declined on a government report that factory orders fell 1.4% in May. The Dow Jones industrial average lost 2.77 points to 3,516.08.
The dollar finished at 1.705 German marks and 106.9 yen, both up on the day.