U.S. Treasury debt prices fell on Monday, giving up gains from the previous session after an unexpectedly weaker nonfarm payrolls report that might have pushed out the timing of an interest rate increase from the Federal Reserve.
Yields on benchmark U.S. 10-year and two-year notes inched up from two-month lows, but the trend remained negative given the uncertain interest rate outlook. Bond yields move inversely to prices.
"We had a big rally last Friday after the jobs report, so this is just the fading of that rally," said David Keeble, global head of interest rate strategy at Credit Agricole in New York.
New York Fed President William Dudley, a voting member on the Federal Open Market Committee, struck a dovish tone on Monday, saying the U.S. central bank will need to "determine whether the softness in the March labor market report evident on Friday 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 U.S. service sector in March, meanwhile, showed a slight dip to 56.5, in line with market expectations, although the current reading was the lowest level in three months.
The employment index was a bright spot, however, hitting its highest mark since October.
The gain in the employment index was noteworthy, given Friday's soft U.S. jobs data.
"Overall, it was an as-expected release with little new information to shift the broader understanding on the economic outlook," said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.
Yields inched higher following the data.
In mid-morning trading, U.S. 10-year Treasury prices were last down 9/32 to yield 1.867 percent, from 1.845 percent late on Friday. U.S. two-year notes were unchanged with a yield of 0.488 percent.
U.S. 30-year Treasuries prices fell 27/32 to yield 2.526 percent, compared with 2.492 percent late on Friday.
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. (Reporting by Gertrude Chavez-Dreyfuss; Editing by Paul Simao)