U.S. government debt prices were mostly weaker on Monday before $7 billion auction of five-year Treasury Inflation-Protected Securities, part of this week's $123 billion in record supply.
Benchmark yields hovered at 1-month highs as Wall Street is poised to open higher on investor optimism in the wake of encouraging quarterly company results. For more, see [.N]
Increasing speculation over the Federal Reserve seeking a semantic change to signal tighter policy down the road sparked a bond sell-off on Friday.
But some traders thought this chatter of the Federal Open Market Committee, the U.S. central bank's policy-setting group, hinting at an increase in interest rates premature, resulting in some support for the bond market, analysts said.
But the bond market continued to feel the weight of this week's record issuance.
Despite the continued talk and speculation about the wording in the next FOMC meeting pertaining to exit strategies which we feel are premature, the front end of the market has outperformed as the supply issue long term is dominating the yield curve, said John Spinello, chief Treasury strategist at Jefferies & Co. in New York.
The price on benchmark 10-year Treasury notes US10YT=RR was down 8/32. Their yield which moves inversely to their price was 3.52 percent, up from 3.49 percent late Friday.
The two-year note US2YT=RR was little changed in price for a yield of 1.03 pct.
In addition to the five-year TIPS auction, the Treasury will sell $29 billion in three-month bills and $30 billion in six-month bills on Monday.
After Monday's auctions, the Treasury will sell $44 billion two-year notes on Tuesday; $41 billion five-year debt on Wednesday and $31 billion in seven-year notes on Thursday.