Treasury debt prices slid as the stock market staged a comeback after Friday's sell-off, on positive developments in the financial sector that cut into demand for low-risk investments.
Traders pushed stocks higher following news that Washington Mutual is close to obtaining a $5 billion cash infusion that may soothe fears about its ability to meet capital requirements stemming from its mortgage losses. This development, together with stronger energy shares, spurred buying of global equities, analysts said.
The move to stocks reversed Friday's rush into bonds, which was prompted by a government report that showed payrolls suffered their biggest monthly loss in five years in March.
"The equity market was stronger overseas and here. This put pressure on Treasurys," said Gary Pollack, head of fixed income trading at Deutsche Bank Private Banking in New York.
The benchmark 10-year Treasury note's price was down 31/32, which pushed its yield up to 3.59 percent from 3.47 percent late Friday.
Two-year notes traded down 10/32 in price for a yield of 1.98 percent, up from 1.82 percent.
Friday's jobs data sealed the notion on Wall Street that the United States is in a recession and reinforced views the Federal Reserve would lower interest rates to revive growth.
Federal fund futures implied about a 30 percent chance the Fed will cut its target rate on loans of surplus reserves between banks by 0.50 percentage point later this month. Late on Friday, the chance of another cut was at 38 percent.
Martin Feldstein, president of the National Bureau of Economic Research, told CNBC he believes the economy has been sliding into recession since December or January. The group is considered the arbiter of US recessions.
Feldstein also cautioned that this contraction may last longer the two most recent ones. (Click here for Feldstein's remarks on this morning's "Squawk Box.")
On the other hand, former Fed Chairman Alan Greenspan had a less dire view, but warned about growing risks that could push the US into a recession.
Greenspan said in an interview published Sunday that he did not believe the United States is in a recession, but added that there is more than a 50 percent chance of the economy contracting.
While such a downbeat economic view would typically hurt the stock market, traders focused on positive company news and hopes that central banks will keep acting aggressively to prevent further damage to the global financial system, analysts and traders said.
"The market is looking beyond the negative news today and looking for better news six months from now," said Deutsche's Pollack.
In the absence of economic data, the moves in stocks will dictate the direction of the bond market, analysts said.
Among other maturities, five-year notes were down 22/32 in price for a 2.77 percent yield, up from 2.62 percent late Friday. The 30-year long bond was down 1-19/32 for a 4.41 percent yield, up from 4.31 percent Friday.