U.S. Treasurys extended earlier gains on Tuesday after Philadelphia Federal Reserve President Charles Plosser said interest rates may need to rise earlier if economic growth improves as forecast.
Affirming his hawkish stance, Plosser in a Washington speech said the Fed is at risk of falling "behind the curve'' in its control of inflation if policy stays at its current loose level as the economy grows and the labor market continues to improve.
Shortly after Plosser's remarks, New York Federal Reserve President William Dudley said he expects inflation to drift higher over the remainder of the year.
"Some of the factors holding down inflation...were one-offs and are now dropping out of the year-over-year figures," Dudley said at an event in New York.
Prices on 30-year Treasurys bonds gained 2/32 in price, with yields at 3.38 percent. Benchmark 10-year U.S. Treasury notes prices were last up 9/32 to yield 2.51 percent, from a yield of 2.536 percent late Monday.
Initially lower, longer-dated Treasurys bonds turned higher after a decline in U.S. stocks drove some safe-haven bids.
Analysts said traders' moves to cover bets against Treasurys in response to falling interest rates had largely been exhausted. The short-covering was partly responsible for benchmark 10-year Treasury yields hitting multi-month lows last week.
"There is probably no more short-covering needed,'' said Jeffrey Young, U.S. interest rate strategist at Nomura Securities International in New York. He added that traders were reluctant to take bullish bets on Treasurys.
"Shorts have been burned a lot, and you don't spend the last week and a half covering just to get back in,'' he said.
Traders also said that an absence of U.S. economic data kept prices flat, along with a wait-and-see period ahead of key events, including the European Central Bank's next policy meeting in early June and upcoming elections in Ukraine.