US yields in focus: US Treasury yields, notably the benchmark 10-year, dipped to one-month lows following Friday's release of employment data, which revealed more job additions than anticipated in February. 

Despite the strong headline figure, underlying weaknesses in the report bolstered expectations of potential interest rate cuts by the Federal Reserve.

Later in the day, yields rebounded as traders geared up for upcoming supply and closed positions ahead of the weekend.

Nonfarm payrolls surged by 275,000 jobs last month, surpassing economists' projections of 200,000 job gains. However, the unemployment rate climbed to 3.9 per cent in February from 3.7 per cent in the preceding three months.

Average hourly earnings increased by 0.1 per cent in February, a slowdown from January's 0.5 per cent rise, resulting in a year-on-year wage growth of 4.3 per cent, down from 4.4 per cent in January.

John Luke Tyner, fixed income analyst and portfolio manager at Aptus Capital Advisors, noted that while the headline figure appeared robust, the details revealed limited strength, potentially aligning with the Fed's inclination towards rate cuts.

Following the jobs report, traders adjusted their expectations, with bets on the Fed commencing rate cuts by June easing from 80 per cent to 73 per cent, as per the CME Group's FedWatch Tool.

The market awaits consumer price inflation data for February, scheduled for release on Tuesday, to gauge further insights into likely Fed policy.

The Fed is expected to maintain rates during its upcoming meeting on March 19-20, although investors will closely monitor any changes in Fed policymakers' interest rate and economic projections.

Benchmark 10-year yields steadied at 4.090 per cent, rebounding from the day's low of 4.038 per cent, the lowest since February 2.

Meanwhile, two-year yields fell to 4.486 per cent and earlier reached 4.409 per cent, the lowest since February 7. 

The yield curve between two-year and 10-year notes narrowed by two basis points to minus 40 basis points.

Preparation for $117 billion in new coupon-bearing supply next week aided the recovery in yields, including $56 billion in three-year notes on Monday, $39 billion in 10-year notes on Tuesday, and $22 billion in 30-year bonds on Wednesday.

The amount banks and fund managers lent to the Fed in its reverse repurchase agreement facility edged up to $444.80 billion on Friday.

(With Reuters Inputs)