Treasury prices gain

US Treasury prices gained on Tuesday on concerns about protectionist trade policies by US President-elect Donald Trump, which hurt the US dollar and increased demand for US bonds. In comments to the Wall Street Journal, Trump said a key part of the House Republican's corporate-tax plan is "too complicated" and that the US dollar is too strong, making it difficult for US companies to compete with China.
Renewed concerns over Britain's planned exit from the European Union also boosted demand for Treasuries.
Prime Minister Theresa May said Britain will quit the EU single market when it leaves in a decisive speech that set a course for a clean break with the world's largest trading bloc.
"We're still in the midst of the weak dollar, lower yield trade," said Jim Vogel, an interest rate strategist at FTN Financial in Memphis. "It seems to represent a reversal from last year and renewed uncertainty about Brexit and US fiscal policy and the need to stay in Treasuries to diversify."
Benchmark 10-year notes gained 14/32 in price to yield 2.33 percent, down from 2.38 percent late on Friday. The yields earlier fell to 2.305 percent, the lowest since November 30.
The US bond market was closed on Monday for the Martin Luther King Jr. Day holiday.
Bonds also gained after New York Federal Reserve President William Dudley said that the US central bank is unlikely to take actions that would "snuff out" the current economic expansion anytime soon because inflation is "simply not a problem."
Consumer price index data on Wednesday will be next watched for further indications about price pressures.
Thursday's $13 billion auction of 10-year Treasury Inflation-Protected Securities (TIPS) will also indicate investor concern about rising inflation.
British inflation hit its highest level since mid-2014 in December, propelled by the Brexit-fuelled fall in its currency.
More protectionist policies in the US could similarly boost inflation, increasing demand for inflation-linked debt.
"When you start to see a big move in trade barriers and there's a big spike in inflation it might be negative for Treasuries, but the one asset that may benefit the most is TIPS," said Aaron Kohli, an interest rate strategist at BMO Capital Markets in New York.
Fed Governor Lael Brainard said on Tuesday that the US central bank might hike interest rates more aggressively if deficit spending under the Trump administration leads to a quick economic boost.