U.S. Treasuries fell Monday, pulling two-year yields off their lowest level since late 2005, as profit-taking set in following the strongest weekly rally since the Sept. 11 attacks in 2001.
A light calendar of economic data had bond traders focused the stock market in the early hours, since Wall Street's losses recently had sent investors seeking the safety of government bonds.
However, many investors were wary of a possible recovery in stocks after last week's losses, when the S&P 500 suffered its biggest weekly drop since the August peak of the credit crisis.
This led traders to cash in on profits with bonds still at their highs.
"It's nothing concrete, just profit-taking after the move that we've had," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.
"The fact that we were not able to make much progress even though equities were still on their lows points to a market that looks over-bought. Fundamentally I don't see any great explanation for the back up that we've had this morning."
Two-year notes slid 4/32 in price, pushing yields up to 3.86 percent. Strong gains earlier in the session pushed two-year yields down to 3.74 percent, the lowest since late 2005.
Benchmark 10-year notes fell 6/32 in price, pushing yields up to 4.42 percent. Earlier in the session, benchmark yields fell near 4.35 percent, their lowest since early-September.
The 30-year long bond slipped 3/32 to yield 4.70 percent. Five-year notes slid 7/32 to yield 4.09 percent. While investors took a breather from recent gains, dealers said the bond market could easily revert to a rally mode if stocks, data or news from the troubled credit markets added to recent worries about the economy.
"The market has come a long way," said Rick Klingman, managing director of U.S. Treasury trading at BNP Paribas in New York. "It is definitely vulnerable both ways at these levels."
Though Monday had no key economic releases, this week's data highlights include reports on sales of existing homes Wednesday and new homes Thursday.