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(Reuters) - Benchmark U.S. Treasuries ended their worst month in almost two years on a firm note on Monday, after falling expectations of central bank accommodation sent sovereign debt yields higher globally this month and made U.S. bonds less attractive to foreigners.
Improving European data has raised expectations that the European Central Bank will reduce bond purchases next year and that the Bank of England will not cut rates this week.
Speculation also rose that the Bank of Japan may pare bond purchases after Governor Haruhiko Kuroda said last week the central bank would not try to push down super-long government bond yields.
"There's been a reduction in holdings from foreigners of U.S. Treasuries this year ... and you saw European markets reprice this month as well," said Dan Mulholland, head of Treasuries trading at Credit Agricole in New York.
Traders are also expecting that the U.S. Federal Reserve will raise rates at its December meeting as U.S. jobs growth remains solid and inflation rises steadily.
"As Europe moves away from accommodation with possibly some tapering next year, and at the same time we get closer to a U.S. rate hike, we've seen yields rise in fixed income markets around the globe," Mulholland said.
Month-end rebalancing and uncertainty over next week's U.S. presidential election helped demand for bonds on Monday even as they posted a weak monthly performance.
Benchmark 10-year notes ended up 4/32 in price to yield 1.83 percent, down from 1.85 percent late Friday.
The yields have increased by 14 percent this month, the largest monthly percent rise since February 2015.
Two-year note yields, which are most sensitive to interest rate changes, increased by 11 percent this month, its worst performance since August.
Investors this week are focused on the BOJ's two-day meeting that will conclude on Tuesday, the Fed's two-day meeting ending on Wednesday and the Bank of England's meeting on Thursday.
Friday's U.S. employment report for October will also be watched for further clues on whether the Fed is likely to raise rates in December.
Employers are expected to have added 175,000 jobs in the month according to the median estimate of 100 economists polled by Reuters.
Traders are pricing in 78 percent chance the Fed will raise rates in December, and only a 6 percent chance of an increase this week, according to the CME Group's FedWatch Tool.
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