NEW YORK (CNN/Money) - Treasurys surrendered a sliver of their recent sizable gains on Monday as upbeat economic data and a surge in stocks prompted profit-taking.

Traders said the market was ripe for a pullback, given that prices had risen for five of the last six sessions while yields had hit four-decade lows day after day.

Just before 3:45 p.m. ET, the benchmark 10-year note slid 16/32 of a point in price to 103-26/32, bringing its yield to 3.17 percent, up from 3.11 percent late Friday afternoon. The 30-year bond fell 27/32 of a point in price to trade at 118-24/32, sending its yield to 4.22 percent from 4.19 percent late afternoon Friday.

The two-year note dipped 4/32 of a point in price to 100-6/32, yielding 1.15 percent, while the five-year note lost 13/32 of a point in price to 102-11/32, yielding 2.12 percent.

The losses were modest as the market clung to a belief the Federal Reserve's policy board would cut its 1.25 percent rate when they meet next week, perhaps as much as a half-percentage point.

"I still think it happens, with a clear bias that they could ease further from that 0.75 percent [perceived new rate],'' said Peter McTeague, Treasury market strategist at RBC Greenwich Capital Markets. "[It] just drives home the message that the Fed wants to keep rates down for an extended period of time."

In the morning's economic news, the New York Empire State index rose to 26.6 in June from 10.6 last month. Economists surveyed by Briefing.com were expecting a reading of 8.8.

Although Monday morning's regional read on manufacturing showed some growth, recent national manufacturing data have indicated weakness. Last Friday's consumer sentiment reading and other economic reports have suggested challenges still face the economy, leading many to speculate that next week's Fed meeting will result in the half-percentage-point cut.

The dollar firmed on Monday, recovering from a near-brush with a new record low against the euro and holding on to minor gains versus the yen amid rumors that the Bank of Japan had once again stepped in to protect the greenback from a bigger slide in a bid to protect Japanese exports.

At around 3:45 p.m. ET, the dollar bought ¥117.63, up from ¥117.39 late Sunday. The euro bought $1.1838, down from $1.1871 late Sunday.

Japan has sold yen for dollars in heavy doses a number of times this year to protect its exports -- seen as essential for the nation's economic recovery.

Japan's Vice Finance Minister for International Affairs, Zembei Mizoguchi, said the yen was in no position to strengthen in the longer term.  

--from staff and wire reports