Treasuries pared gains spurred by demand for havens as the first full week of the new year brought an expected surge in sales of new corporate bonds that will compete for investor cash.     

The rally sparked by the weekend US arrest of Venezuela's President Nicolas Maduro also faltered as oil prices rebounded from their initial declines. Meanwhile, Treasury investors face a barrage of US economic data over the source of the week — culminating with Friday's December employment report — that may alter the outlook for Federal Reserve interest-rate cuts.

"Even as geopolitics are once again top of mind for investors, we're reminded that this week offers an array of key fundamental updates – most of which are focused on the employment landscape," Ian Lyngen, head of US rates strategy at BMO Capital Markets, wrote in a note. This week's labor tidings are "frankly, still the most relevant wildcard for the US economy and monetary policy."

Yields remained marginally lower on the day after rebounding from session lows as corporate bond issuers — on hiatus since mid-December — slated the first of the day's offerings, anticipated to total around 20. Dealers have projected about $70 billion of sales this week and a $215 billion monthly total that would set a monthly record if reached. 

The 10-year was near 4.17%, the two-year 3.47%, each less than two basis points lower on the day. Money markets are pricing in two quarter-point Fed rate cuts, the first by mid-year, and around a 30% chance of a third this year.

The US bond market delivered a total return of 6.3% last year, its best annual run since 2020, but momentum faded in December amid signs of US economic resilience in data and financial markets, along with rising European and Japanese government bond yields. The 10-year yield returned to the high end of its range since early September around 4.20%.

So far this year, Treasury options activity has included several notable wagers on 10-year yields falling to 4% in the coming weeks, a level last seen in November. 

This first of this week's major economic releases, the ISM manufacturing gauge for December, and its gauge of prices paid by factories, are seen rising slightly, according to a Bloomberg poll of economists. The report also includes a gauge of manufacturing employment.

Most government bond markets globally gained as crude futures prices initially fell on the prospect of a rebound in Venezuelan production. The market was already facing a supply glut from OPEC+ and other producers.

While heightened geopolitical concerns often spur a demand for havens such as Treasuries, US stock futures are higher on Monday driven by gains in the technology sector. US cash bonds are also lagging their swap counterparts, which signals increased risk appetite.

"Geopolitical shocks historically don't tend to have much of a lasting impact," Deutsche Bank AG strategists including Henry Allen wrote in a client note. "That might seem surprising, but that's because markets generally trade on macro variables like growth and inflation, rather than geopolitical shocks per se."