By Deborah Levine, MarketWatch

SAN FRANCISCO (MarketWatch) -- Treasury prices erased an earlier gain on Monday in thinned Christmas Eve trading, with the major point of discussion remaining U.S. lawmakers' inability to negotiate a way to avert the fiscal cliff -- a steep falloff in economic activity feared to coincide with the looming expiration of tax breaks and the onset of spending cuts.

"Nothing major will be decided before January," said Andrew Brenner, head of international fixed income at National Alliance Securities. "There is about a 10% chance that something gets done before year-end."

However, he also noted that worries about a possible recession should the U.S. go over the fiscal cliff may be overdone, as the nation's housing industry recovers. Analysts have also pointed to a possible boom in the domestic energy industry as well as very easy monetary policy in the world's major economies as factors that could all help growth going.

Yields on 10-year notes (10_YEAR), which move inversely to prices, turned up 1 basis point to 1.78%, from 1.76% earlier. A basis point is one one-hundredth of a percentage point.

Yields on 30-year bonds (30_YEAR) rose 1 basis point to 2.95%.

Five-year yields (5_YEAR) increased 1 basis point to 0.78%.

Bond markets have a 2 p.m. Eastern recommended early close, while U.S. stocks close at 1 p.m. Both will be shut Tuesday for Christmas.

On Friday, Treasury prices rallied as hopes for a deal to avert the fiscal cliff appeared to unravel.

Congress is out of session for the holiday as well, while President Barack Obama went to Hawaii.

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