Will 2013 finally be the year that Treasury yields rise and spell the end of the generational rally in U.S. government debt prices? Treasury ETFs have been mauled this week after the fiscal cliff compromise and latest Federal Reserve minutes, and were set for further declines Friday following the jobs report.

The iShares Barclays 20+ Year Treasury Bond (NYSEArca: TLT) was down 0.6% in premarket trading Friday. Bond rates and prices move in opposite directions.

The U.S. economy created 155,000 jobs in December and the unemployment rate was unchanged at 7.8%. Economists surveyed by MarketWatch expected an increase of 160,000 jobs last month, according to a report.

The yield on the 10-year Treasury note has jumped from a low of about 1.6% in December to nearly 2% in less than a month. The budget compromise has curbed demand for safe havens on expectations the deal will support the U.S. economic recovery. [Risk On: Treasury ETFs Fall More After Fiscal Cliff Agreement]

Also, the Fed minutes released Thursday suggested the central bank may unwind its bond-buying program as early as this year. The Fed has been purchasing Treasuries and other debt securities after the financial crisis in an effort to keep rates low and stimulate the economy. This has helped keep rates low and Treasury prices high.

On Friday, 10-year Treasury yields rose to an eight-month high but pulled back somewhat after the jobs report.

“We think the Treasurys market overreacted to the FOMC minutes,” said Mike Pond, head of global inflation-linked research at Barclays, in a Dow Jones Newswires report. He pinned more of the sell-off on investors positioning ahead of Friday’s jobs report.

The Treasury ETF is down about 5% for the holiday-shortened week and trading volume has been picking up. TLT has crashed below its 200-simple moving average, which had provided strong support in recent months.

Bond bubble?

Of course, the question is whether this will finally be the year that interest rates rise and all those investors who piled into bond funds and ETFs feel serious pain.

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