US Treasuries gained as a global rout in semiconductor stocks pushed investors toward safe-haven assets. Falling oil prices further lowered expectations for Federal Reserve rate hikes, as lower energy costs reduce inflationary pressure. Swap contracts now price in only about 45 basis points of tightening through mid-2027, reflecting a shift in trader sentiment.

Short-term notes saw the most movement ahead of a $69 billion two-year auction. Yields on these tenors dropped by at least two basis points, though the upcoming sale still expects a yield near 4.20%. This volatility follows a hawkish press conference by Chairman Kevin Warsh on June 17, which previously spiked yields.

Market dynamics remained mixed as five- and 10-year yields hit weekly highs. Traders attribute this specific move to hedging activity surrounding a massive bond offering by SpaceX. The company plans to raise between $20 billion and $25 billion on Tuesday, creating temporary pressure on longer-dated government debt instruments.

Natixis strategist John Briggs noted that the current rally is a classic risk-off reaction. Investors are weighing the value of government bonds against the recent hawkish signals from the FOMC. The outcome of the two-year auction will reveal if the market has moved past Warsh's recent policy stance.