NEW YORK: US Treasuries yields dipped on Monday in light trading, as European bonds rallied on expectations the European Central Bank will use more stimulus to revive flagging growth in the region.
ECB President Mario Draghi said Friday the bank was prepared to respond with all available tools if euro zone inflation drops further. Investors took this to mean the ECB could start an asset purchase program or other stimulus measures, which would boost assets like stocks and bonds.
Draghi's comments caused yields on most euro zone government bonds to fall to record lows, with Treasuries also benefiting from the rally.
"Part of it is the rally in European rates. Generally markets are pricing for a higher chance of the ECB being more accommodative going forward," said Michael Chang, an interest rate strategist at Credit Suisse in New York.
Benchmark 10-year notes were last up 3/32 in price to yield 2.40 percent, down from 2.41 percent late on Friday.
Trading was modest ahead of the US Labor Day holiday on Sept. 1, with traders in Britain out for a bank holiday on Monday.
New supply is likely to be the major focus this week, with gross domestic product data on Thursday also anticipated.
The Treasury will sell $93 billion in new coupon-bearing debt this week, including $29 billion in two-year notes on Tuesday, $35 billion in five-year notes on Wednesday and $29 billion in seven-year notes on Thursday.
It will also sell $13 billion in two-year floating rate notes on Wednesday.
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