Treasury prices rose Monday as investors jumped back into the market, seizing on attractive prices following big declines at the end of last week.
Federal Reserve Chairman Ben Bernanke's comments that an economic recovery is still likely to be slow and inflation should remain in check helped support the bond market.
Bonds had slumped on Friday as traders interpreted a strong November jobs report as a sign that interest rates could rise soon. However the reassurances from Bernanke Monday about rates remaining low encouraged investors to move back into Treasurys.
The price of the 10-year note, a benchmark for many loans, rose 13/32 to 99 16/32 in late trading Monday. That sent its yield down to 3.43 percent, from 3.48 percent late Friday.
Richard Bryant, a senior vice president of U.S. Treasury trading at MF Global, said there have been a lot of buyers interested in buying up 10-year notes when the yield climbs to around 3.50 percent. Two-year notes reach a similar buying threshold when yields have risen to around 0.85 percent, he said.
The price of two-year notes rose 4/32 to 99 31/32, pushing its yield down to 0.77 percent from 0.82 percent. Its yield rose above 0.85 percent Friday.
The gains in Treasurys were all the more notable since they came just ahead of key auctions of three- and 10-year notes and 30-year bonds this week. Bond traders will often try to push Treasurys lower in the days leading up to an auction in hopes of getting cheaper prices on newly issued debt.
"It underscores the widespread demand for Treasurys globally," Bryant said.
The 30-year bond rose 8/32 to 99 25/32. Its yield fell to 4.39 percent from 4.40 percent.
The government is selling $40 billion in three-year notes on Tuesday; $21 billion in 10-year notes on Wednesday; and $13 billion in 30-year bonds on Thursday.
The price of the three-year note rose 7/32 to 100 12/32, sending its yield down to 1.24 percent from 1.32 percent.
In other trading, the yield on the three-month T-bill fell to 0.03 percent from 0.04 percent. Its discount rate was 0.04 percent.
The cost of borrowing between banks increased was unchanged. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ held steady at 0.2566 percent.