Treasuries finished in the red after Eurozone representatives on their way to the G7 meeting indicated they would be open to cutting European Central Bank rates. Officials said the EU's Ministry of Finance will inform the upcoming G7 members that further Euro appreciation will threaten their recovery prospects, which could trigger a rate cut. The news lifted the dollar, but Treasuries sold off.
Earlier, the absence of data and major news, and another record large increase in foreign custody holdings in the weekly Fed report helped prices. A further dollar selloff heightened expectations for foreign-exchange-linked Treasury buying.
The Federal Open Market Committee meets Tuesday and Wednesday. In data next week, Friday's fourth-quarter GDP report will take center state.