Investors pulled out of Treasurys Thursday after two reports suggested that the job market is improving.
The price of the 10-year Treasury note fell 72 cents per $100 invested Thursday. Its yield, which moves in the opposite direction, rose to 3.56 percent from 3.48 percent late Wednesday.
The sell-off came after the number of people applying for unemployment benefits fell to an almost three-year low last week. Also, the U.S. service sector grew at the fastest pace in five years last month, and those companies hired at the quickest rate since before the recession.
Traders will be watching for February's employment report due out Friday. Analysts are expecting strong hiring.
One of the main reasons the Federal Reserve has kept interest rates near zero is because of high unemployment. If the job market improves faster than expected, the central bank could raise short-term interest rates.
A warning from Europe's central bank that it's prepared to raise rates to stem off inflation also weighed on the Treasury market, said Josh Stiles, an analyst at IDEAGlobal.com.
"Traders are edgy," he said.
Bond prices have been lifted recently by the turmoil in Libya and the spike in oil prices.
The Treasury Department also said it will auction $32 billion in three-year notes, $21 billion in ten-year notes and $13 billion in 30-year bonds next week.
In other trading, the price of the 30-year bond fell 91 cents per $100 invested, while its yield rose to 4.62 percent from 4.57 percent late Wednesday. The yield on the two-year note rose to 0.77 percent from 0.70 percent.
The yield on the three-month T-bill was unchanged at 0.12 percent. Its discount was 0.13 percent.