Treasurys posted their worst month of the year Tuesday amid speculation the Federal Reserve will signal an increase in interest rates next year as the economic recovery firms.

Benchmark 10-year-note yields rose before reports this week forecast to show American employers added more than 200,000 jobs in September. Withdrawals from a Pacific Investment Management Co. exchange-traded fund that was run by Bill Gross slowed Monday after record redemptions the day the star trader left. The European Central Bank may announce further monetary stimulus to avert deflation Oct. 2.

“The Treasury market has responded to the Fed shift in dialog that has tended toward the hawkish side,” said Christopher Sullivan, who oversees $2.3 billion as chief investment officer at United Nations Federal Credit Union in New York. “The data is getting better, but the market and the Fed are waiting to see if the labor market can still improve and if it will bleed over into wage gains.”

The benchmark U.S. 10-year yield rose one basis point, or 0.02 percentage point, to 2.49 percent at 5 p.m. in New York after earlier gaining five basis points, according to Bloomberg Bond Trader data. The 2.375 percent note due in August 2024 fell 3/32, or 94 cents per $1,000 face value, to 99.

Yields climbed 15 basis points during September, the most for a month since December, trimming the third-quarter decline to three basis points.

Jobs Reports

U.S. debt dropped before a report Wednesday from the ADP Research Institute is forecast to show companies added 205,000 jobs this month, which would be the sixth month above 200,000. The U.S. nonfarm payrolls report on Friday is forecast to show a 217,000 increase after a less-than-forecast gain of 142,000 in August.

Fed officials are watching progress in the labor market as they wind down their bond-buying program aimed at boosting economic growth.

Policy makers this month boosted their median estimate for the benchmark interest rate for the end of 2015 to 1.375 percent, compared with 1.125 percent in June. They have kept their target for the rate, which banks charge each other on overnight loans, close to zero since December 2008.

“The bias for rates is currently to the upside, but you need the data to confirm,” said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. “A 2.5 percent 10-year note isn’t reflecting any fears of strong economic growth, inflation or a much more hawkish Fed. The market is waiting to get confirmation from the data.”

Inflation Outlook

The difference between yields on 10-year notes and similar- maturity Treasury Inflation Protected Securities, a gauge of expectations for consumer prices over the life of the debt, shrank to as low as 1.93 percentage points, the narrowest since June 2013.

A gauge of U.S. prices tied to consumer spending rose 1.5 percent in the 12 months ended in August, down from 1.6 percent in July, a government report showed Monday. Fed policy makers aim for price increases of 2 percent a year.

Eurozone consumer-price inflation slowed to 0.3 percent in September from the year before, a report Tuesday showed. That’s the weakest pace in almost five years.

With the official interest rate near zero, bond investors say ECB President Draghi may need to do more to steer the region away from the deflation and debt traps that condemned Japan to two decades of stagnation.

Pimco ‘Blip’

Investors pulled about $98 million from the Pimco Total Return ETF, according to data available on Pimco’s website that shows adjusted shares outstanding. That followed a record $446.5 million withdrawal on Sept. 26 as Gross announced his sudden departure from the firm he co-founded to join Janus Capital Group Inc.

“The Pimco story had a larger impact on Friday and Monday, but the redemption issue has been overplayed,” Miller of GMP Securities said. “The Pimco story will eventually be an asterisk in a blip of the market.”

Treasurys investors were the least bearish in four months in the week ended Monday, according to a survey by JPMorgan Chase & Co. Investors trimmed the proportion of net shorts to 18 percentage points, the least since May, from 23 percentage points the previous week. Outright shorts dropped to 35 percent from 38 percent, while outright longs increased to 17 percent from 15 percent and neutrals rose to 48 percent from 47 percent.