In early US trading, US Treasuries moved higher as improved market sentiment and falling oil prices supported a broad rally in European bonds, which in turn provided support for US debt.

After the $58 billion 3-year US Treasury auction cleared below the pre-auction trading yield, the Treasury rally largely held, though an oil price rebound limited the scope for further intraday gains.

Wednesday will bring greater duration risk, when the US Treasury issues $39 billion in 10-year notes, followed by a $22 billion 30-year bond reopening on Thursday.

Just after 3pm New York time, US Treasury yields were 2-4 basis points lower across the curve, with intermediate maturities leading the advance, pushing the 2s10s30s butterfly spread down nearly 3 basis points on the day.

The US 10-year Treasury yield closed slightly above its intraday low but was still down 4 basis points at 5.27%. As oil prices rebounded from their intraday lows and turned slightly higher late in the session, Treasuries closed off their session highs.

The 3-year note auction cleared 0.2 basis points below the pre-auction trading level, with the front end showing little reaction to the result. In terms of bidding data, direct bidders were allotted 31.7%, the highest since February; indirect bidders were allotted 57.6%, well below the recent average.

As of 3pm New York time, US Treasury futures volume was about 75% of the 20-day average. An early sizable block purchase of 2-year Treasury futures briefly pushed the 2-year yield to its intraday low.

As of 3:36pm New York time, the 2-year Treasury yield fell 2.1 basis points to 4.7913%; the 5-year Treasury yield fell 2.7 basis points to 5.0302%; the 10-year Treasury yield fell 3 basis points to 5.2751%; the 30-year Treasury yield fell 1.5 basis points to 5.6471%; the spread between 5-year and 30-year Treasury yields widened about 1.2 basis points to 61.51 basis points; the spread between 2-year and 10-year Treasury yields narrowed about 0.9 basis points to 48.18 basis points.