US bond yields were little changed on Monday after a boost from stronger German government debt and a Federal Reserve official's remarks that the US central bank may only raise rates two times this year. "Overall it has been an extremely quiet session. The market had a bit of a bid tracking Europe and (German) bunds earlier today but quickly hit its highs early on and made back its levels," said Justin Lederer, a Treasury analyst at Cantor Fitzgerald in New York.
German 10-year debt yields fell as low as 0.41 percent on Monday, the lowest since December 28. Disappointing jobs data on Friday has also raised doubts that the US central bank will raise three times this year, as Fed officials have indicated.
Atlanta Fed President Raphael Bostic said on Monday the central bank may only need to raise rates two or fewer times in 2018 given weak price pressures and possible loss of public confidence in its ability to hit a 2 percent inflation target. Job growth slowed more than expected last month as retail employment declined, but a pick-up in monthly wage gains fuelled hopes that inflation may be picking up.
In separate remarks on Monday, San Francisco Fed President John Williams said the central bank could better fight a recession by committing to hold down interest rates longer to keep average inflation on a steady upward path. Attention is focused on new supply as the US Treasury Department prepares to auction new three-year notes on Tuesday, 10-year notes on Wednesday and 30-year bonds on Thursday.
Demand for three-year notes may be mixed given that the US central bank is expected to continue hiking interest rates. But sales of long-term securities are expected to go well. "Since 10-years seem to be firmly entrenched in that 2.40 percent to 2.50 percent area, I would think that should have a tendency to garner some interest," Mary Anne Hurley, vice president of fixed income at D.A. Davidson in Seattle. "As for 30-years, there's lots of demand for longer-dated paper."
The US 10-year note yielded 2.478 percent at 2:44 pm (1744 GMT). The benchmark government bond last closed at 2.476 percent. The three-year note yield, which is sensitive to traders' views on Fed policy, stayed near the decade high of 2.07 percent reached earlier in the day.