US Treasuries rose on Monday as investors took a pause from three weeks of heavy selling and prepared to digest $44 billion in new debt. Some analysts hoped the recent slump in government bonds would attract some buyers in the government's three-legged refunding auction.
"We've seen dip buying and think that's a precursor to larger commitment into supply," said David Ader, government bond strategist at RBS Greenwich.
The Treasury was scheduled to sell $18 billion in three-year notes on Tuesday, $13 billion of five-year notes on Wednesday and another $13 billion in 10-years on Thursday. Ader said the latest bout of data showing weakness in employment and subdued wage increases was also beneficial to Treasuries, and should at least prevent further selling in the near-term. This pattern was holding true at least for now, with benchmark 10-year notes climbing 9/32 for a yield of 4.63 percent.
That was down from 4.67 percent on Friday, but dramatically higher than the 4 percent seen as recently as early September.
Since then, evidence has accumulated suggesting that the Federal Reserve will continue raising interest rates for the foreseeable future, barring some major disruption in economic growth. With no such turbulence in sight, economists have started bumping up their forecasts for the peak in the Federal Reserve's target short-term rate, closer to 5 percent from earlier estimates around 4.75 percent.
The futures market is now pricing in around a 75 percent probability of another interest rate hike in March, with December and January already fully built into expectations.
As investors contemplated what would come next for the market, the 30-year bond rose 19/32 for a yield of 4.83 percent.
Two-year notes were flat for a yield of 4.46 percent, while five-year notes gained 2/32 to yield 4.55 percent.
One positive omen for Treasuries was a glaring lack of growth in wages and salaries, which analysts generally believe is a prerequisite for any sort of broader inflationary uptick.
"Any sustained inflationary pressure - certainly of the sort some investors fear today - has historically required a measure of wage inflation," said Milton Ezrati, senior economist and strategist at Lord Abbett. "That, however, seems to be entirely absent today."
Another factor in the current economic landscape that appears to favour government debt is the prospect that energy prices might finally take their toll on consumer spending - and just in time for the key holiday shopping season.