NEW YORK: US Treasuries prices rose on Monday on expectations that Federal Reserve Chair Janet Yellen would take a dovish tone on monetary policy this week and as traders viewed a fresh drop in oil prices as a sign of deflation.
Yellen will testify before Congress on Tuesday in a semiannual address on the economy and monetary policy before the Senate Banking Committee.
While Treasuries have been underperforming for weeks as investors expected the Fed to hike interest rates by mid-year, analysts now expect Yellen to take a dovish tilt after minutes from the Fed's January policy meeting showed policymakers were concerned about raising rates too soon.
"They don't have to hike in June, they don't have to hike in September, they hike when they need to hike," said George Goncalves, head of U.S. rates strategy at Nomura Securities International in New York, in reference to the Fed. He said Yellen's testimony would likely be "dovish to balanced."
Falling oil prices were also seen as a sign of deflation, underpinning expectations for a cautious Fed.
The drop in oil prices further supported Treasuries on the view that the bonds' returns were better protected from inflation, which eats away at interest payouts by degrading purchasing power.
"We're seeing abating inflationary trends," said Justin Hoogendoorn, fixed income strategist at BMO Capital Markets in Chicago. "It makes it more difficult for the Fed to argue that they should be hiking rates."
Brent crude was last down $1.20 at $59.02 a barrel.
U.S. 30-year Treasuries were last up 1-4/32 in price to yield 2.68 percent, from a yield of 2.74 percent late Friday. Benchmark 10-year notes were last up 17/32 in price to yield 2.07 percent, from a yield of 2.13 percent late Friday.
U.S. two-year note yields were up 2/32 in price to yield 0.61 percent, from a yield of 0.65 percent late Friday.
On Wall Street, U.S. stocks dipped after the Dow and S&P closed at records last week. The benchmark S&P 500 stock index was last down 0.26 percent.
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