The 30-year bond fell more than a full point in afternoon trade after the Federal Reserve's Beige Book on regional economic trends said shortages of workers pushed up wages across the United States in March and April, although retail prices remained relatively stable. Separately, the government also reported factory orders rose 2.2 per cent in March, their first rise in three months.

At 3 PM (1900 GMT) the long bond was down 1-10/32 to 101-29/32, pushing the yield up to 6.11 per cent, while 10-year notes were off 23/32 to 100-22/32 to yield 6.40 per cent.

The short end of the maturity range was under less pressure, however, because steep declines in equity prices generated a bid for the relative safety of short-term government securities. Also, the treasury department's announcement on Wednesday that it might auction two-year notes on a quarterly basis in the future instead of on the current monthly schedule, kept two-year prices flat.

Fed policy makers meet next on May 16 when they will decide whether to push the key federal funds overnight bank lending rate above its current six per cent level in an attempt to slow economic growth and fend off inflationpressures. The central bank has moved up rates by one-quarter percentage point moves five times since last June but an increasing number of Fed watchers think a half percentage point move is more likely this time around. Otherwise, the market was little affected by the treasury's announcement of its quarterly refunding plans. Instead, it focused on what are expected to be strong economic data due later in the week.

"You've got a couple of different dynamics going on in the short-end ... a supply reduction in combination with a stock trade," said Thomas Estes, head of fixed-income sales and trading at Daiwa Securities America Inc.