Most U.S. government debt prices were little changed on Monday as traders moved to the sidelines before Christmas and given the absence of a U.S. budget deal to avert a package of automatic tax hikes and spending cuts that are set to take effect next year.
Analysts downplayed the day's price moves as signals of shifts in market sentiment in one of the slowest trading days of the year. They expected the market to trade in a tight range into the end of the year, barring any surprises on the budget talks in Washington.
There was little impetus for investors to change their bond positions without fresh U.S. economic data or the Federal Reserve buying or selling Treasuries for its bond programs aimed to help the economy, analysts said.
"Everyone is just watching Washington and what's going on there,''said Justin Lederer, Treasury strategist at Cantor Fitzgerald in New York.
The budget negotiations have stopped as U.S. President Barack Obama and Congress are on a holiday break. There are seven more days to reach a deal to avoid the "fiscal cliff," $600 billion of tax increases and spending cuts set to kick in next year.
Economists have warned that lack of a deal could cause a U.S.recession and hurt the global economy.
The U.S. bond market will close early at 2 p.m. Eastern, an hour after Wall Street. U.S. and most European markets will be shut on Tuesday,while major Asian markets will be open.
"The markets are dead. Those traders who are working are making sure positions don't get out of hand due to thin trading,'' said Lou Brien, market strategist at DRW Trading in Chicago.
Treasuries trading volume was roughly a fifth of its average daily turnover, according to bond broker ICAP.
Traders have not completely abandoned hopes of a budget deal,even if it's only a temporary fix.
"They will probably come up with something unsatisfactory,''DRW's Brien said.
Cantor's Lederer said there is an increased likelihood of the country going over the cliff, though if the White House and Congress manage to reach a deal in early January, that should limit the damages to the stock market and the economy.
Benchmark 10-year notes were last 1/32 lower in price to yield 1.775 percent, up 0.5 basis points from late on Friday after reaching an eight-week high last week near 1.85 percent. The 10-year yield has held in a range of 1.60 to 1.90 percent since late summer.
Thirty-year bonds fell 5/32 with a yield of 2.943 percent,up 0.9 basis points from Friday's close. Last Tuesday, the 30-year yield broke above 3 percent for the first time since late October on optimism over a coming fiscal pact.