NEW YORK (CNN/Money) -
Treasury prices turned sour in late trading Monday as investors were wary of making any drastic moves ahead of key testimony this week from Federal Reserve Chairman Alan Greenspan.
At about 3:30 p.m. ET, the benchmark 10-year note lost 7/32 to 97-2/32 to yield 4.37 percent, up from 4.33 percent late Friday, and the 30-year bond shed 13/32 at 102-1/2 to yield 5.20 percent, up from 5.16 percent late last week.
The two-year note fell 1/32 of a point to 98-30/32 to yield 2.05 percent, and the five-year note lost 5/32 of a point at 98-23/32 with a yield of 3.41 percent.
With no fresh economic data to influence the market, the direction of interest rates was foremost on traders' minds.
Investors are eagerly awaiting the latest word from Greenspan, who is scheduled to testify on the banking industry before the Senate Tuesday and on the economy to the Joint Economic Committee on Wednesday.
Bond bulls hope he will counter recent market talk about a possible early hike in interest rates, if only to stop yields from rising too far too fast.
"He does not want a rapid break in bond prices to snuff out the jobs recovery before it has a chance to catch hold," argued Chris Low, chief economist at FTN Financial.
A recent sharp rise in yields has dragged mortgage rates higher and choked off mortgage refinancing.
Traders noted a report from Fed-watcher Greg Ip in the Wall Street Journal suggesting the central bank was not about to hike rates at its meeting in May but would resort to "verbal tightening" so as to prepare the market for higher interest rates down the road.
That would entail shifting its inflation outlook to balanced, a move many analysts had already discounted, and perhaps even dropping its pledge to be patient on policy.
A report in the Financial Times said the International Monetary Fund would warn the Fed this week that it needs to prepare the world economy for higher interest rates.
The next Fed policy meeting is May 4, but the market is not fully pricing in a 25 basis point hike until the August 10 meeting.
"Greenspan will need to either confirm the 'patient' theory or ratchet up his view on jobs and the economy," Richard Gilhooly, fixed-income market strategist at BNP Paribas, told Reuters.
In the currency market, the dollar traded in mixed territory against the euro and the yen.
The dollar bought ¥108.50, up from ¥107.70 late last week, and the euro bought $1.2014, up from $1.200 late Friday.
-- from staff and wire reports
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