Treasury bond and note prices collapsed anew, lifting long-maturity yields to their highest levels in nearly three months and short-maturity yields to their highest levels in years.

There was no specific catalyst for the latest leg down in Treasury prices. The economic calendar was bare, there were no other market-moving events and

Nasdaq

stock prices fell -- which might have been expected to provide some support for the bond market.

Analysts attributed the selloff to enduring anxiety about the

Fed, which is widely expected to hike the

fed funds rate by 50 basis points next week, combined with the approach of the quarterly refunding, in which the Treasury Department issues new long-dated notes (and sometimes bonds). In the second-quarter refunding, the department plans to sell $12 billion of new five-year notes to dealers tomorrow, and $8 billion of new 10-year notes on Wednesday.

"It's mostly just a continuation of negative attitude, with the Fed going to be raising rates," said Joseph Shatz, government bond strategist at

Merrill Lynch

. But at the same time, in the days leading up to a quarterly refunding, when they'll have to buy the Treasury's new securities, bond dealers have no incentive to buy. They'd rather sell, so that they can buy the new issues at lower prices. "Lots of times dealers try to cheapen up securities ahead of time so they can bid at lower levels," Shatz said.

The benchmark 10-year Treasury note ended down 12/32 at 99 17/32, lifting its yield 5.3 basis points to 6.564%, the highest since Feb. 12. The 30-year Treasury bond fell 25/32 to 100 1/32, lifting its yield 5.6 basis points to 6.246%, the highest since Feb. 16.

Shorter-maturity yields inched up to new multi-year highs. The five-year note fell 7/32 to 96 12/32, lifting its yield 5.7 basis points to 6.823%, the highest since April 1997, and the two-year note sagged 3/32 to 99 2/32, lifting its yield 5.3 basis points to 6.881%, the highest since March 1995.

At the

Chicago Board of Trade

, the June

Treasury futures contract fell 22/32 to 92 28/32.

Uncertainty about how high the Fed will ultimately move the fed funds rate and how long-maturity yields will be affected by the moves is discouraging investment in the long end of the Treasury market, said Eric Cheung, a bond portfolio manager for

Wilmington Trust

. "Why buy the long bond if the rates subject to the Fed may go higher?" he said. Many investors would rather "wait for the dust to settle."

Low volume exacerbated the selloff,

IFR

managing analyst Ken Logan said. The big institutional investors who are the end users of Treasury securities are sidelined till the May 16

Federal Open Market Committee meeting, "leaving a very bearish and defensive Street to accommodate the price action," he said. And the Street "has no interest in supporting the market till the auction is out of the way."

The good news, Logan says, is that the Treasury market can be expected to rebound, if not once the refunding is done, then after the FOMC meeting, when investors may once again feel emboldened to buy. Assuming, that is, that the committee doesn't surprise the market with an aggressive statement on top of a 50-basis-point rate hike.

Currency and Commodities

The dollar gained against the yen and fell against the euro. It lately was worth 108.97 yen, up from 108.56. The euro was worth $0.8974, up from $0.8967. For more on currencies, see

TSC's

Currencies column.

Crude oil for June delivery at the

New York Mercantile Exchange

rose to $28.09 a barrel from $27.29.

The

Bridge Commodity Research Bureau Index

fell to 215.72 from 216.08.

Gold for June delivery at the

Comex

fell to $277.60 an ounce from $280.10.