US 10-year government bond yields fell 2.3 basis points to 1.79 percent - reflecting demand for assets regarded as a safer play at times of a worsening economy. Yields have struggled to sustainably rise above a 200-day moving average around 1.805 percent, traders said.
Treasury prices rebounded, along with German Bunds, after Moody's downgraded Spanish regions including economically important Catalonia. European stocks fell almost one percent in morning trade, weighed down by a batch of bearish corporate outlooks. US stock index futures also pointed to a lower open.
"It's more of a Bund-led rally and stocks (are) getting beat up a little bit, so it's basically a risk-off type (trade)," one trader said.
Shorter-dated bond prices underperformed other maturities, as the market braced for supply later in the session, a second trader said.
The Treasury Department sells 2-year notes later in the session, kicking off $99 billion worth of supply this week which also includes five-year notes on Wednesday and seven-year paper on Thursday.
In the secondary market, two-year bond yields were flat at 0.31 percent, while five-year yields dipped 1.4 bps to 0.78 percent.
Aside from auctions of Treasuries this week, investors were looking ahead to the Federal Reserve's policy meeting on Tuesday and Wednesday, but many expect the central bank to hold off on fresh steps for now.