US Treasury yields rose on Monday and the US two-year, 10-year yield curve was the steepest in 14 months as investors prepared for the end of the year. Benchmark 10-year yields held below recent highs of around 1.95%, after weakening this month on improving risk appetite after the United States and China agreed to the first phase of a trade deal.

The yields were last at 1.90%. They have backed up from 1.69% at the beginning of December and are up from a three-year low of 1.43% reached on Sept. 3. Longer-dated notes underperformed shorter-dated debt, sending the closely watched two-year, 10-year yield curve to its steepest level since October 2018 at 34 basis points.

A major factor behind the relative stability in shorter-dated notes is the Federal Reserve's daily operations to provide liquidity to the repurchase (repo) agreement market, where banks and investors borrow funds to finance asset purchases and other expenses.

The liquidity has helped to stave off a scramble for funds over year-end, at least so far, which can send the cost of borrowing significantly higher. "That's anchoring the short end of the curve," said Jim Vogel, an interest rate strategist at FHN Financial in Memphis, Tennessee.

The yield curve inverted in August, a signal that a recession may be likely in the next one to two years. It has since steepened, however, on optimism the US economy will not slow as much as expected and on expectations the Federal Reserve is unlikely to continue lowering its benchmark interest rate, after cutting it three times this year. Trading volumes were light before Wednesday's New Year's Day holiday.