Interest rates fell Monday as traders jumped back in the Treasury market after suffering from seller's regret over the weekend.
Rates held steady for the first hour of trading, but then dropped as the day wore on. The yield on the 10-year Treasury retraced much of the rise it made on Friday as bonds sold off, but the moves likely were exaggerated by thin trading.
"Cooler heads prevailed over the weekend. Traders are thinking maybe the sell-off was overdone," said Bill O'Donnell, head of government bond strategy at RBS Securities Inc. O'Donnell also said, though, that he thinks bonds may have further to fall.
The 10-year Treasury note's yield fell to 2.54 percent in afternoon trading, down from 2.65 percent late Friday. Its price, which moves in the opposite direction from its yield, rose to $100.719 from $99.781.
Investors mostly ignored a government report on consumer spending Monday and instead positioned themselves ahead of larger economic reports due out this week.
"We're back to the trend today. Everything will be a building drumbeat to the payrolls data on Friday," said Mike Wallace, global market strategist at Action Economics.
On Tuesday, the Conference Board releases the Consumer Confidence Index for August, while the Institute for Supply Management releases its monthly manufacturing survey Wednesday. The Labor Department releases its employment data for August on Friday.
The yield on the two-year notes maturing in August 2012 fell to 0.50 percent in Monday afternoon trading from 0.56 percent late Friday. Its price increased to $99.750 from $99.625.
In other trading, the price on the 30-year bond that matures in August 2040 rose to $104.781 from $103.313, while its yield fell to 3.61 percent from 3.69.
The yield on the three-month bill slipped to 0.13 percent from 0.14 percent.
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