By Min Zeng 
 

U.S. government bonds started March's trading on a down note, hurt by corporate bond supply and higher U.S. stocks.

The price weakness followed the biggest monthly selloff in February since June 2013, driven by continued anxiety over the Federal Reserve's interest rate outlook.

In recent trading, the yield on the benchmark 10-year Treasury note was 2.045%, compared with 2.002% Friday, according to Tradeweb.

Yields rise as bond prices fall.

U.S. stocks strengthened Monday, dimming the allure of U.S. government bonds. The Nasdaq Composite stock index hit the 5000 mark for the first time since March 2000.

Meanwhile, companies are tapping a still-low rate environment to sell new bonds aiming to lock in favorable terms in financing.

Pharmaceutical company Actavis PLC is expected to sell more than $20 billion in bonds this week. The bond sale would rank behind only Verizon Communications Inc.'s $49 billion bond sale in September 2013, according to recent figures from Dealogic. Investment-grade firms are selling bonds in the U.S. at the fastest pace since 2009, according to Dealogic.

Companies planning new debt sales tend to sell Treasury bonds to hedge against unwanted swing in interest rates, highlighting the U.S. government bond market's important role in global financing.

Demand for corporate bond sales has been robust this year as buyers were attracted by higher yields than those offered by comparable Treasury bonds.

Concerns about the Fed potentially raising rates in June rattled the Treasury market last month. The 10-year note's yield increased by about 0.32 percentage point last month after falling nearly half of a percentage point in January.

Debate has been growing over the past month on whether the central bank is going to raise its official interest rate in June or later. Fed Chairwoman Janet Yellen said last week that the timing hinges on how the economy performs going forward.

Investors will zero in on data this week, especially the nonfarm jobs report due Friday.

"The volatility in the bond market will continue," said Anthony Cronin, a Treasury bond trader at Treasury bond trader at Societe Generale SA. "This is the last major piece of data before the next policy meeting. If it's another strong report, Fed officials are likely to drop the patience language. This could really weigh on Treasury bonds."

The Fed's next interest-rate meeting is due March 17-18.

The Fed is grappling with an uncertain global growth outlook. It is the only major central bank prepared for raising rates this year for the first time since 2006.

Many other central banks have either cut rates or tapped other measures to boost growth. China's central bank cut interest rates over the weekend and the European Central Bank will start buying bonds this month to curb deflation risks.

While job growth in the U.S. has gained traction over the past year and the unemployment rate has plunged, some releases recently have pointed to caution.

Monday's data showed U.S. consumer spending fell by 0.2% in January. The monthly gauge of the U.S. manufacturing sector fell to 52.9 from 53.5 in January. The price index for personal consumption expenditures, the Fed's preferred inflation measure, fell 0.5% from December.

Many investors don't expect U.S. bond yields to jump significantly as they are attractive compared with ultralow yields investors can get in other high-grade government bond markets around the world.

A number of government bonds in Europe have been trading at negative yields in recent months. The buying binge in the coming months from the ECB will leave fewer bonds available for purchases for investors.

The 10-year Treasury yield was 2.173% at the end of 2014 and 3.03% at the end of 2013.

Write to Min Zeng at min.zeng@wsj.com