Treasuries fell and stocks rose in value as traders prepared for a $99 billion bond sale and the Federal Reserve meeting in Jackson Hole, Wyoming later this week.
Markets expect Federal Reserve Board Chairman Ben Bernanke to announce the possibility of a future asset-purchase program, commonly called QE3.
An asset-purchase program could firm up the slight fall in Treasury prices if it confirms market expectations. If a monetary easing program is not announced, traders expecting to see higher prices because of additional demand could sell off bonds, driving prices sharply lower.
Chairman Bernanke is expected to speak on Friday morning from Jackson Hole.
Analysts expect price movements in longer-term securities, as Bernanke has already announced that interest rates will be near zero until 2013. This action controls the price and yield of short-term debt.