Shorter-term Treasurys fall on Fed comments

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NEW YORK (CNNMoney.com) -- Treasurys were mixed Tuesday, with the 30-year bond rising following a surprise drop in consumer confidence, while shorter-term debt was pressured by concerns about the Federal Reserve's interest rate policy.

The market rallied earlier in the session after a key gauge of consumer confidence fell more than expected, raising concerns about retail sales this holiday season.

The Conference Board, a New York-based business research group, said its Consumer Confidence Index fell to 53.1 in September from an upwardly revised 54.5 in August. Economists expected a reading of 57.

The surprise drop helped "provide a little bit of a bid in the longer end of the curve," said Nick Kalivas, vice president of financial research at MF Global.

But shorter-term notes came under pressure after comments from Dallas Fed president Richard Fisher revived speculation that the central bank could raise interest rates abruptly if economic conditions improve.

"I expect that when it comes time to tighten monetary policy, my colleagues and I will move with an alacrity that, if needed, will be equal in speed and intensity to that with which we pursued monetary accommodation," Fisher said in prepared remarks.

Fisher's comments echoed similar statements made by Fed Governor Kevin Warsh last week.

The Fed speak "hurt the psychology of the front end of the curve," said Kalivas.

Uncertainty still in play. The Fed said in its most recent policy statement that interest rates, which stand at historic lows near 0%, will remain exceptionally low for some time.

Many investors are "jumping on the bandwagon that there's a risk the Fed will move faster than originally thought," Kalivas said. "But timing is important, and this week's data will play a big role in determining that [timing]."

On Friday, the government will release its closely watched jobs report for September. Economists surveyed by Briefing.com expect a loss of 180,000 jobs. The unemployment rate is forecast to rise to 9.8% from 9.7%.

Meanwhile, the market is also preparing for the government to announce on Thursday how much debt it will auction off next week.

Analysts at Wrightson ICAP expect the U.S. to offer $39 billion in three-year notes, $20 billion in 10-year notes, $12 billion in 30-year bonds and $7 billion of 10-year Treasury Inflation Protected Securities, or TIPS.

Bond prices: The benchmark 10-year note was down 4/32 to 102-23/32 and its yield rose to 3.3%. Bond prices and yields move in opposite directions.

The 2-year note eased 1/32 to 100 with a yield of 1%.

The 30-year bond rose 1/32 to 108-2/32. Its yield was 4.03%.

The yield on the 3-month bill was 0.13%.