NEW YORK: US Treasury debt prices dropped on Monday in thin trading, giving up gains from the previous session after an unexpectedly weak nonfarm payrolls report that might have pushed out the timing of an interest rate increase from the Federal Reserve.
Yields on benchmark US 10-year and two-year notes rose from two-month lows, but the trend remained negative given the uncertain interest rate outlook. Bond yields move inversely to prices.
"Part of the sell-off in Treasuries is technical in nature. After the huge rally last Friday, market participants are taking profits," said David Coard, head of sales and trading, at Williams Capital in New York.
Coard also said a jump in oil prices may have pushed up inflation expectations slightly. To some analysts, this suggested the Fed may still be on track raising interest rates this year.
Oil prices soared on Monday as traders reassessed how quickly Iran might increase exports after a preliminary nuclear deal reached last week. Investors were also anticipating that a months-long rise in US crude inventories may be slowing.
In late trading, US crude futures were up 5.74 percent at $51.96 per barrel.
"If you think about it, the whole notion of deflation has been kind of driven by the collapse in oil prices," Coard said.
US 10-year Treasuries were last down 21/32 in price to yield 1.909 percent, from 1.845 percent late on Friday.
US 30-year Treasuries fell more than a point to yield 2.572 percent, compared with 2.492 percent late on Friday.
On Monday, New York Fed President William Dudley, a voting member on the Federal Open Market Committee, struck a dovish tone, saying the Fed will need to "determine whether the softness in the March labor market report ... foreshadows a more substantial slowing in the labor market than I currently anticipate."
His remarks briefly pulled up prices of Treasuries and pushed yields lower by half a basis point.
Monday's data on the US service sector in March, meanwhile, was in line with market expectations, although the reading of 56.5 was the lowest in three months.
The employment index was a bright spot, however, hitting its highest mark since October.
CRT said volume in the Treasury market was light with cash trading at 40 percent of the 10-day moving-average. Five-year notes were the most active issue, taking a 34 percent market share while 10-year issues were a distant second at 22 percent.
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