U.S. Treasury debt prices fell on Thursday, following the lead of weaker euro zone debt and after stronger-than-expected U.S. data on jobs and the services sector.
Euro zone debt fell on Thursday before an interest rate decision by the European Central Bank which left rates on hold at 4 percent, as expected. In Britain, the Bank of England raised rates by 25 basis points to a six-year high of 5.75 percent, and most analysts expect another rate increase in 2007.
U.S. Treasuries extended their losses after the Institute for Supply Management's services index for June came in above forecasts, suggesting to investors that the economy may be growing at a faster pace than originally expected.
Bonds also suffered after ADP Employer Services said U.S. private employers likely added 150,000 jobs in June, above analysts expectations for a reading of 100,000.
The higher-than-expected ADP number made investors brace for the June non-farm payrolls data due on Friday. Analysts polled by Reuters on average expect employers to have added 120,000 new jobs in June.
Since we're heading into the employment report on Friday, some bond traders might be lightening positions given the strong ISM service number and the good ADP employment number this morning, said Gary Thayer, chief economist at A.G. Edwards and Sons in St. Louis, Missouri.
Benchmark 10-year notes were trading 13/32 lower in price for a yield of 5.10 percent against 5.05 percent late on Tuesday. U.S. markets were closed on Wednesday for the Independence Day holiday.
(Additional reporting by Ellen Freilich)