After ending the previous session notably lower, treasuries showed a strong move back to the upside on Monday following the release of disappointing manufacturing data.
Bond prices moved sharply higher over the course of the morning and managed to remain firmly positive throughout the afternoon. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price fell by 7.9 basis points to 1.58 percent.
The strength among treasuries was due in large part to the release of a report from the Institute for Supply Management showing the first contraction in U.S. manufacturing activity in almost three years.
The ISM said its purchasing managers index dropped to 49.7 in June from 53.5 in May, with a reading below 50 indicating a contraction in manufacturing activity. Economists had expected the index to show a much more modest decrease to a reading of 52.0.
With the bigger than expected decrease, the index pointed to a contraction for the first time since July of 2009, when it showed a reading of 49.2.
Rob Carnell, chief international economist at ING, said, "June's U.S. manufacturing ISM is substantially weaker than forecast, which will raise expectations for some further stimulus from the Fed, even though they have just extended and amended their twist policy by a further $267 billion of maturity extension."
The disappointing U.S. manufacturing data came on the heels of separate reports showing continued contractions in manufacturing activity in both Europe and China.
Meanwhile, traders largely shrugged off a separate report from the Commerce Department showing a bigger than expected increase in U.S. construction spending in the month of May.
Trading on Tuesday could be impacted by the release of a report on factory orders, although trading activity is likely to be relatively subdued in an abbreviated session.
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