By Sunny Oh

Treasury yields were slightly lower on early Monday trading as investors watched stock markets rebound across the world.

The 2-year note yield was mostly flat at 2.905%, near its highest levels in a decade. The 10-year Treasury note yield was down 0.8 basis point to 3.194%, while the 30-year bond yield fell 1.2 basis points to 3.373%, near its more than four-year high of 3.401%. Bond prices move in the opposite direction of yields.

The rebound in stocks was led by the biggest rally in Chinese equities (http://www.marketwatch.com/story/stock-futures-point-slightly-higher-as-china-equities-rise-earnings-in-focus-2018-10-22)in three years after regulators worked to reassure investors last week amid concerns of a trade war and slowing growth. China's central bank and government pledged to support the economy after third-quarter growth hit a nine-year low of 6.5%. The Shanghai Composite finished higher 4.1% on Monday.

U.S. stocks looked to open higher with futures for the Dow Jones Industrial Average and the S&P 500 up by around 0.4%.

Looking ahead, investors will digest around $108 billion of short-dated government paper this week. Analysts say the burgeoning supply hasn't overwhelmed appetite for long-term Treasurys, but may have contributed to the relentless rise of short-end yields this year. Coupled with the Federal Reserve's gradual but steady rate hike trajectory, short-end Treasurys have struggled to take down the bump in debt supply.

"Valuations have started to show some concerns about supply over and above the influence of higher rates due to the Fed cycle," wrote Jim Vogel, interest-rate strategist at FTN Financial.

The Italian budget saga continued to capture the attention of market participants. Moody's Investors Service downgraded Italy's debt rating to one notch above 'junk'. Nonetheless, Italian government paper rallied as investors fixated on the accompanying "stable" outlook, a sign that a further downgrade would not happen soon.

The 10-year Italian government bond yield slipped 12.9 basis points to 3.434%, according to Tradeweb data.

(END) Dow Jones Newswires

October 22, 2018 08:07 ET (12:07 GMT)