NEW YORK (CNNMoney.com) - Bond prices fell slightly Monday, shrugging off an upbeat inflation reading as investors awaited guidance from tomorrow's Federal Reserve policy meeting.

The dollar gained against the euro and the yen.

The 10-year note fell 5/32 to 99-22/32 to yield 4.53 percent, up from 4.51 percent from late Friday. The 30-year bond lost 7/32 to 109-23/32, yielding 4.71 percent, up from 4.68 percent in the previous session. Bond prices and yields move in opposite directions.

The two-year note slipped one tick, yielding 4.52 percent. The five-year note was down 2/32, yielding 4.46 percent.

Treasury prices barely budged after the Commerce Department reported early in the session that personal spending rose 0.9 percent in December, slightly above the 0.8 percent gain economists surveyed by Briefing.com had expected. Personal income rose 0.4 percent, in line with estimates, the report showed.

While spending was stronger than expected, the Commerce Department's consumer price index suggested that inflation is still tame. The closely watched core index, which doesn't include volatile food and energy prices, added 0.1 percent in the month and 1.9 percent over the past 12 months.

Treasury investors fear inflation since it erodes the value of the fixed-income investment.

"The 1.9 percent December year-over-year rise in the core personal consumption expenditure index reflects a stable and modest inflation rate. That would support the idea that the Fed can stop raising rates soon," Patrick Fearon, senior economist at A.G. Edwards and Sons in St. Louis told Reuters.

The latest inflation reading comes a day before Fed policymakers meet to discuss interest rates. Economists widely expect Fed policymakers to hike interest rates by a quarter of a percentage point to 4.50 percent when they meet Tuesday.

It remains unclear however, whether the central bank under the helm of Ben Bernanke, would bring the interest rate hike campaign to an end when it meets in March. Wall Street economists and interest rate futures markets are increasingly expecting the Fed to raise rates to 4.75 percent, but are considerably less clear as to what happens after that.

Apart from Tuesday's Fed meeting, bond traders will have plenty of economic data to digest this week with the government scheduled to release its debt issuance plans for the first quarter on Wednesday and nonfarm payroll numbers due out on Friday.

In currency trading, the euro bought $1.2086, down from $1.2105 late Friday. The dollar bought ¥117.63, up from ¥117.27 in the previous session.

--from staff and wire reports

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