Treasury yields dropped to start the week after economic data pointed to a slowdown in growth, while rising concerns about the delta coronavirus variant made investors flock to safe-haven bonds.
The yield on the benchmark 10-year Treasury note fell 8 basis points to 1.15%. The yield on the 30-year Treasury bond dipped 5 basis points to 1.836%. Yields move inversely to prices. One basis point equals 0.01%.
The U.S. manufacturing sector kept expanding in July, but at a slower pace than a month ago. The July Manufacturing PMI registered 59.5% a decrease of 1.1 percentage points from the June reading of 60.6 percent, according to the Institute for Supply Management.
The spread of the delta virus variant continued to unnerve investors. The U.S. is averaging more than 72,000 new Covid cases a day the last 7 days, according to the latest CDC data, levels not seen since February this year.
The economic picture is closely watched by the Federal Reserve as the central bank tries to decide when it should start tightening monetary policy.
The Fed could begin slowing down its bond purchases as early as October, should the August and September jobs report show growth in the 800,000 range, central bank Governor Christopher Waller told CNBC in a Monday interview.
"In my opinion, that's substantial progress and I think you could be ready to do an announcement in September," he told CNBC.
Meanwhile, Minneapolis Federal Reserve President Neel Kashkari told CBS' "Face the Nation" on Sunday that the nervousness around the delta variant could slow the recovery of the U.S. labor market.
Concerns about inflation also plagued the market, however, a key inflation indicator showed lesser-than-feared price pressures on Friday. The core personal consumption expenditures price index rose 3.5% in June year over year. It marked a sharp acceleration in inflation, but came in slightly below a Dow Jones forecast of a 3.6% jump.
Auctions were held on Monday for $54 billion of 13-week bills and $51 billion of 26-week bills.
— CNBC's Maggie Fitzgerald contributed to this market report.