The U.S. bond market closed on Wednesday due the Veterans Day holiday. They will resume on Thursday when the market reopens.
U.S. Treasurys rose on Tuesday with benchmark yields retreating from a more than three-month peak on demand from investors seeking bargains after a market sell-off on worries about the Federal Reserve raising interest rates in December.
Revived appetite for U.S. government debt spurred bids at a $24 billion auction of 10-year notes, the second leg of this week's quarterly federal refunding.
Corporate bond supply slowed ahead of the Veterans Day holiday on Wednesday, when the bond market will be closed, reducing downward pressure on Treasuries prices which had fallen on growing expectations the U.S. central bank will raise rates for the first time in nearly a decade at its Dec. 15-16 meeting.
After the first rate hike, the Fed is expected to raise rates gradually as domestic inflation remains below its 2 percent target and the European Central Bank and other major central banks will likely provide more stimulus to help their countries' economies in the coming months, analysts said.
"The Fed will be careful about raising rates. Growth and inflation will not increase all that much," said Phil Guarco, global head of fixed income strategy at J.P. Morgan Private Bank in New York.
Benchmark 10-year Treasuries notes were up 6/32 in price, erasing a modest decline earlier. The 10-year yield was 2.320 percent, down 2 basis points from Monday. It reached 2.377 percent on Monday, its highest intraday level since July 21, according to Reuters data.
A solid 10-year note auction added bids for longer-dated Treasuries in U.S. afternoon trading. While the latest 10-year issue fetched its highest yield since June, investor demand was the strongest in six months.
The Treasury will complete the refunding with a $16 billion auction of 30-year bonds on Thursday.
In the corporate bond sector, supply slowed after $15.5 billion of deals were priced on Monday. AstraZeneca was sole issuer in the investment-grade market on Tuesday with a $6 billion offering, according to IFR, a Thomson Reuters unit.
Short-dated Treasuries lagged some longer-dated issues on the possibility of a rate increase in five weeks.
The two-year yield was down 2 basis points on the day at 0.866 percent, below Friday's 0.958 percent, which was its highest since May 2010.
"Barring a disastrous (November) jobs report, the Fed is on track to make the move," said Bill Adams, MFS Investment Management's chief investment officer of global fixed income in Boston.