Traders must rebalance their portfolios at the end of the month which can sometimes lead to market moves that are out of sync with news and economic data.
In the morning, longer-dated US Treasury yields rose faster than those at the short end of the yield curve as trade concerns, among other factors, decreased investor appetite for risk. But by the end of the North American session, yields ended near where they closed on Friday,
"It is peculiar that the market is less and less confident that the Fed is going to be providing" another rate cut this year, said John Herrmann, director of US rates strategies at MUFG Securities. "In the last couple of hours of trading, maybe it's just some of the flows surrounding month-end and quarter-end."
The two-year note yield, a proxy for investor expectations of rate hikes, was up less than half a basis point to 1.628%, with the benchmark 10-year note yield also up 0.4 basis point at 1.677%. The spread between the two- and 10-year note yields - the traditional measure of the yield curve - fell to 4.7 basis points after rising as high as 6.2 basis points earlier in the day.
"It's a little bit of a surprise today because it started out relatively bearish but sentiment has definitely shifted," said Herrmann.
Short-dated yields held steady despite softness in the Institute for Supply Management's Chicago Business Barometer, which dropped to 47.1 in September from 50.4 last month.
Jon Hill, US rates strategist at BMO Capital Markets, attributed the earlier steepening to overnight headlines including outgoing European Central Bank President Mario Draghi's interview with the Financial Times.