US 30-year bond yields rallied from a roughly 2-1/2 month low after the data's release.

The report showed new home sales increased 6.2 percent to a seasonally adjusted annual rate of 685,000 units last month, the highest since October 2007. New home sales surged 18.7 percent on a year-on-year basis in October and have increased for three straight months.

"This series is a lot more volatile than existing home sales, so we take this with a healthy pinch of salt, but this data continue to support the notion that the housing market is in relatively good shape," said Aaron Kohli, interest rates strategist at BMO Capital Markets in New York.

The data further boosted the outlook for US interest rate increases.

The Federal Reserve has raised borrowing costs twice this year and is widely anticipated to boost rates again next month. It has forecast three rate hikes in 2018.

Increased expectations for interest rate hikes have pushed the yield curve to its flattest in a decade.

The gap between US 2-year note and US 10-year note yields contracted to 56.30 basis points, the tightest since October 2007. The gap was last at 58.30 basis points.

The difference in five-year and 30-year yields narrowed to 69.90 basis points.

"We haven't seen much to challenge the view that we expect the curve to continue to flatten on a longer horizon once the ostensibly risk-positive events of this week - tax plan vote later this week - have passed," Kohli said.

The US Congress returns from the Thanksgiving holiday to reconcile the House and Senate tax bills.

In mid-morning trading, the 10-year Treasury yield was up slightly at 2.345 percent, from 2.34 percent late on Friday.

US two-year yields, which climbed to a nine-year peak last week, rose to 1.761 percent, from 1.748 percent on Friday.

US 30-year bond yields rose to 2.772 percent, from Friday's 2.761 percent. Earlier in the session, 30-year yields touched 2.738 percent, the lowest since mid-November.