(Bloomberg) -- Treasuries fell for the first time in three days before the U.S. sells $21 billion of 10-year notes and as signs the economic recovery is gathering pace spurred bets the Federal Reserve will keep reducing debt purchases.

Benchmark yields extended gains as a private report showed more jobs growth last month than forecast before the Fed releases the minutes of its December meeting when it announced plans to cut bond buying starting this month. Economists said a government report this week will show U.S. employers added almost the same number workers in December as the month before while the jobless rate stayed at a five-year low. The three-year yield rose to the highest since September after a $30 billion auction of the securities yesterday attracted the least demand since October.

“The market is taking it as a reason to sell back off toward the 3-percent line,” said Guy LeBas, chief fixed-income strategist at Janney Montgomery Scott LLC in Philadelphia, which oversees $11 billion in fixed income assets, referring to the private jobs report. ’’ Any crossover of 3% will be met by good demand. We’re relatively close to the high end of the trading range.’’

The U.S. 10-year yield rose four basis points, or 0.04%, to 2.98% at 8:17 a.m. New York time, according to Bloomberg Bond Trader prices. The 2.75% note due in November 2023 fell 10/32, or $3.13 per $1,000 face amount, to 98 2/32. The yield dropped to 2.94% yesterday, the lowest since Dec. 24.

YIELD FORECAST

The 10-year yield will climb to 3.15% by June 30, widening the spread over the two-year rate to 2.61%age points, according to Bloomberg surveys of analysts with the most recent forecasts given the heaviest weighting. The gap was 2.55% today.

“The bond market continues to expect Treasury yields to rise, with a bias toward a steeper yield curve until the Federal Reserve raises short-term rates,” Vanguard Group Inc. economists including Joe Davis and Roger Aliaga-Diaz in Malvern, Pennsylvania, wrote in a research report yesterday. “The macroeconomic environment justifies a 10-year yield in the range of 2.75% to 3.75% at present.”

Companies in the U.S. boosted payrolls by 238,000 in December, figures from ADP Research Institute in Roseland, New Jersey showed today. The median forecast of 36 economists surveyed by Bloomberg called for a 200,000 advance.

Employers added 195,000 workers in December, down from 203,000 the previous month, economists in a Bloomberg News survey forecast before the Labor Department reports the figure Jan. 10. The unemployment rate will remain at 7%, a separate survey showed.

AUCTION UPDATE

The 10-year notes scheduled for sale today yielded 2.97% in pre-auction trading, compared with 2.824% at the previous sale on Dec. 11. Investors bid for 2.61 times the available debt last month, down from 2.7 times in November.

Indirect bidders, a class of investors that includes foreign central banks, bought 48.9% of the notes at last month’s sale, the most since June. Direct bidders, non-primary- dealer investors that place their bids directly with the Treasury, bought 10.6%, the least since August 2012.

The Treasury is scheduled to complete this week’s sales with a $13 billion auction of 30-year bonds tomorrow.

Treasuries rose yesterday as Fed Bank of Boston President Eric Rosengren said the central bank should cut stimulus “only very gradually” as the economy recovers. Rosengren dissented from the Fed’s decision last month to taper its bond purchases, citing elevated unemployment and an inflation rate that is less than the central bank’s target.

“I preferred to wait before beginning the program, but the program it looks like we’re embarked on is a very gradual program and I think a gradual removal of accommodation is appropriate,” he said yesterday in an interview with Bloomberg.

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