Yields near 9-month highs on jobs picture.

U.S. Treasury prices slipped on Monday, leaving benchmark yields near 9-month highs after last week’s government report showing the strongest monthly job growth in nearly three years.
The March payrolls data pushed bond yields up as traders assumed the Federal Reserve would pursue a less accommodative monetary policy once the economy was consistently producing enough jobs to lower unemployment.
“The employment markets have turned and look less likely to experience a setback,” said Bank of Tokyo/Mitsubishi UFJ chief financial economist Chris Rupkey in New York. “Policymakers may yet decide to raise rates sooner rather than later this year.”
Rupkey added that after the last two recessions, the Fed did not start to raise official lending rates until a year after the unemployment rate had peaked. But in those cases, the fed funds target was not at an emergency level of near zero percent.
Among longer-dated Treasuries, the benchmark 10-year note yielded 3.96 percent , a level not seen since June 11, 2009 when it hit 4.01 percent, according to Reuters data. The 30-year bond yield was 4.81 percent, little changed from Friday, but the highest in more than 9 months.
Trading was thin, however, with markets closed in Europe and most of Asia.
Short-dated Treasuries also weakened, leaving the gap between two- and 10-year yields at 2.82 percentage points, slightly narrower than Friday.
The Institute for Supply Management’s non-manufacturing index is the main economic report for the trading session. Economists polled by Reuters offered a median estimate of 54.0 for the March index, up from 53.0 in February, a reading that would point to a modest acceleration of growth in this sector.
The market will also take note of February’s pending home sales data. Both reports are due at 10 a.m. (1500 GMT).

Supply, fed board meeting:
Bond traders were also looking ahead to this week’s $82 billion in longer-dated note supply, including an $8 billion 10-year Treasury Inflation Protected Securities (TIPS) auction on Monday, followed by a $40 billion three-year note sale on Tuesday, a $21 billion 10-year note auction on Wednesday and a $13 billion 30-year bond sale on Thursday.
The Treasury is also slated to sell at least $83 billion in bills this week.
Most analysts were downplaying the significance of Monday’s Fed Board of Governors meeting.
The meeting typically takes place every other Monday to consider the petitions of the 12 regional Fed banks for changing or maintaining their discount rates.
The market generally dismisses these board meetings as routine, but recently they have attracted more attention because on February 18 the board raised the discount rate by 25 basis points to 0.75 percent, said Dana Saporta, analyst at Stone & McCarthy Research Associates in Princeton, New Jersey.
“At some point, in keeping with its process of ‘normalizing’ monetary policy, the Board is likely to increase the discount rate by another 50 basis points to 1.25 percent,” she said.
Such a move would bring the spread between the discount rate and the top of the fed funds rate target range to 100 basis points, the same spread in place before the money market crisis erupted in the summer of 2007, she said.
Saporta said the Fed Board can increase the discount rate at its convenience and is not necessarily confined to making such announcements in the context of these routine meetings.
“So while a discount rate hike is clearly possible as soon as (this) week, it is by no means a certainty,” she said.