U.S. Treasury bonds fell on Monday, driven by oil prices rising for a third consecutive day and a surge in the corporate bond market with 19 new issuances, the highest single-day count since January. However, futures trading volumes were below recent averages due to a lack of fundamental catalysts.

At the New York close, U.S. Treasury yields climbed 4 to 5 basis points, nearing the highest levels of the past week. This followed a 5.1% increase in WTI crude oil futures, settling at $82.13 per barrel, marking a one-week high, as the situation in the Middle East remains deadlocked. Overnight indexed swap (OIS) rates linked to Federal Reserve meeting dates rose, reflecting increased market bets on future Fed rate hikes. While 2027 contract rates increased by 4 to 5 basis points, the implied rate hikes in market pricing still fall short of two 25-basis-point increases. Despite this, options trading in the secured overnight financing rate (SOFR) showed a clear bias toward upside protection, including notable flows such as the purchase of 20,000 SFRZ6 96.50/97.00 call spreads.

The corporate bond market saw 19 issuers raise $27.6 billion, exceeding half of the total estimated weekly issuance volume. However, dealers expect issuers to lean toward completing bond sales before the release of July's consumer price index (CPI) on Wednesday. Cleveland Federal Reserve President Beth Hammack, in an interview near the end of the U.S. trading session, stated that the U.S. economy requires a "certain number" of rate hikes, as current interest rate levels are not significantly constraining economic growth. Hammack dissented last month when the Fed decided to hold rates steady, advocating for a hike.

As of 3:00 PM New York time, U.S. Treasury futures trading volumes ranged from 79% to 95% of their 20-day average. By 4:00 PM Eastern Time, the 2-year Treasury yield rose 4.4 basis points to 4.2389%; the 5-year yield increased 5.5 basis points to 4.4065%; the 10-year yield climbed 5.7 basis points to 4.7026%; and the 30-year yield gained 4.9 basis points to 5.2499%. The spread between 5-year and 30-year yields narrowed by about 0.6 basis points to 84.16 basis points, while the spread between 2-year and 10-year yields widened by about 1.4 basis points to 46.16 basis points.