2017.11.2122:26:00UTC+00U.S. Government Bonds Higher Ahead of Thanksgiving

U.S. government bond prices strengthened on Tuesday as investors expect inflation to remain soft as the Federal Reserve hikes rates.

The yield on the benchmark 10-year Treasury note was at 2.361 percent from 2.370 percent on Monday.

The yield on the two-year note last stood at 1.773 percent, higher from 1.754 percent on Monday. Its gap with the 10-year yield was reduced to 0.588 percentage point from 0.782 percentage point at the end of October.

With the Thanksgiving holiday approaching, several traders said they didn't expect a major move in the Treasurys market this week, though light trading volumes could occasionally lead to small, sudden changes in yields.

Several investors and analysts see the possibility of Treasury yields increasing if Congress passes the tax bill, partly due to legislation under consideration which would add to the federal budget deficit.

Investors also expect little risk of rising inflation and have higher expectations that the Fed will keep hiking interest rates.