U.S. Treasury prices fell Wednesday as traders booked profits on recent safe-haven trades driven by worries the U.S. economic recovery has hit a wall. Less grim data and another mid-day Wall Street rally after recent lows also put downward pressure on the bond market, analysts said.
“You are seeing a bit of a unwind of the moves into the back end of the curve. It’s just profit-taking,” said Jessica Hoversen, an analyst with MF Global Research in Chicago.

The modest pullback in bonds did not dispel worries about a U.S. double-dip recession. Recent disappointing data on the labor and housing markets have emboldened bond bulls who have bet the Federal Reserve will keep short-term interest rates near zero well into the second half of 2011, analysts and investors said.

The economic backdrop along with nonexistent price pressure is precarious for a $12 billion auction of 10-year Treasury Inflation Protected Securities scheduled for Thursday, they said.

“Disinflation is a a major threat. The market is pricing in a period of slow growth, even a double-dip,” said Hoversen.

Still, with little data on the docket Wednesday, analysts said stock markets drove activity in bonds.

“It’s going to be a stock-driven day,” said Jeff Given, portfolio manager at MFC Global Investment Management in Boston.