Policy-makers have argued that a June slowdown in growth was a mere blip in an otherwise healthy recovery. Investors are worried their theory could be corroborated in this week's data, damaging safe-haven government debt.

Compounding the uneasy mood was a hefty pile of upcoming supply -- $35 billion worth will make its way into the market this week.

The week's first notable economic report certainly caught bond bulls off guard. Sales of existing homes climbed 2.1 percent to 6.95 million in June, confounding analysts, who had looked for a pullback.

"How much of this is just people rushing out to lock in rates before they go up remains to be seen," said Steve Ricchiuto, chief U.S. economist at ABN Amro.

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Some of the economic data this week will likely echo the softness seen at the end of the last quarter. The advance GDP report on Friday, for instance, is expected to show growth slowed to an annual 3.6 percent in the second quarter from 3.9 percent in the first.

But the week's numbers may also offer evidence that activity picked up in July. If so, that would tend to support the Federal Reserve's optimism on the economy and reaffirm the outlook for steady interest rate hikes.

Kansas City Federal Reserve President Thomas Hoenig indicated as much on Monday, saying the economy was doing well and should register growth above 4 percent in 2004. Economists seemed to agree.

"The Chicago PMI should post a healthy rebound from a big dip in June, one clearly distorted by the annual auto plant retooling," said Eric Green, an economist at BNP Paribas.

The Chicago purchasing management survey is due on Friday.