NEW YORK (CNN/Money) - Treasury prices climbed Monday as the dollar's retreat heightened the chances of foreign central bank buying at this week's U.S. debt auction, and a fall on the stock markets provided extra support.
Right before 4:00 p.m. ET, the benchmark 10-year note rose 14/32 of a point to 99-19/32 to yield 4.05 percent, down from 4.09 percent late Friday, and the 30-year bond gained 19/32 of a point to trade at 106-26/32 with a yield of 4.92 percent, down from 4.95 percent late last week.
The two-year note rose 3/32 to 100-13/23 to yield 1.66 percent and the five-year note gained 11/32 to 99-29/32 with a yield of 3.02 percent.
In the currency market, the dollar couldn't sustain last Friday's rally as the U.S. currency fell against the euro and the yen.
The euro bought $1.2556, up from $1.2496 late Friday, and the greenback purchased ¥108.42, down from ¥109.12 late last week.
"The (bond) market has a better tone to it," said Richard Gilhooly, fixed-income market strategist at BNP Paribas.
"We reached the highs in yields overnight, when the dollar-yen got up to 109.40 and that was temporary as the dollar since given up -- only 30 cents against the euro -- but 70 to 80 cents against the yen, so you have seen a bid come into the market," he said.
U.S. equities took a hit across the board Monday, in line with the fifth weekly drop in the Nasdaq technology stocks index, which also offered Treasurys a small cushion.
The renewed fall by the dollar resurrected talk that the Bank of Japan, the largest overseas holder of U.S. debt, had been intervening in the currency markets to curb the yen.
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The Treasury market has become so sensitive to intentions of foreign central banks that when the dollar surged on Friday, Treasury yields staged their largest one-day rise in yields, only to fall on Monday when the currency came off its highs.
The BOJ is thought to have diverted much of its intervention dollars into Treasurys, so the greenback snaking lower could tempt the BOJ and other foreign central banks to take a large portion of this week's two-year note sale.
Treasury said earlier on Monday it will sell $26 billion of new, two-year notes on Wednesday.
At the last two-year note sale in January indirect bidders, which include foreign central banks, took a hefty 42 percent of the offer. Anything less this time could cause concern that foreign demand may be evaporating.
"Foreign central banks have always been heavily weighted toward short-term debt, so if they are pulling back, it could show in the two-year sector first," one trader at a U.S. primary dealer noted earlier.
-- Reuters contributed to this story.
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