U.S. Treasurys rose slightly Tuesday in lackluster trade as investors looked ahead to the release of minutes from the Federal Reserve's last policy meeting when the central bank cut benchmark interest rates.
Before the Fed minutes, traders took back some of Friday's losses that followed a stronger-than-expected reading on monthly payrolls.
The minutes from the Sept. 18 meeting will be closely parsed Tuesday afternoon for clues to the thinking behind the Fed's decision to cut rates by half a percentage point, which marked the first such easing in monetary policy in more than four years.
The Fed said in its policy statement that it took the action to "forestall" adverse effects on the economy from a slowdown in housing and tightening credit conditions.
However, the stronger-than-expected payrolls data late last week has since soothed some market fears about stalling economic growth.
Analysts are mulling whether the Fed will deem it necessary to cut rates again at a meeting later this month.
"The key to this week will be the minutes of the Fed meetings today," said Andrew Brenner, market analyst with MF Global in New York. "This will give us good insight into the Fed thought process."
Ahead of the release of the Fed minutes Tuesday afternoon, benchmark 10-year notes were trading 4/32 higher in price for a yield of 4.62 percent down from 4.64 percent late Friday. Two-year notes were unchanged in price for a yield of 4.09 percent.
"The flow is extremely light -- the market seems to be retracing some of its steps because we were weaker on Friday after payrolls," said William O'Donnell, head of U.S. interest rate strategy at UBS in Stamford, Connecticut.
The U.S. bond market was closed Monday for the Columbus Day holiday.
Fed fund futures Tuesday morning implied a 40 percent probability that the Fed will cut interest rates by a quarter point at their Oct. 30-31 meeting.
Bonds were supported Tuesday by data showing U.S. consumer confidence fell in October as sentiment was hit by the continuing negative situation in the mortgage market, high fuel prices and rising debt levels.
Investor's Business Daily and TechnoMetrica Market Intelligence said their IBD/TIPP economic optimism index fell in September. It was the seventh straight month in which the index was in pessimistic territory.
Several Fed officials were also set to speak Tuesday afternoon, including St. Louis Fed President William Poole, San Francisco Fed President Janet Yellen and Cleveland Fed President Sandra Pianalto.