There remains a disconnect between how much easing the market expects and what policymakers consider likely.
Traders said retail sales have been too buoyant to figure in fast rate cuts in the short term.
Bonds are on course to narrowly avert a third consecutive annual loss.
It was the lowest yield since July as bond investors tried to assess the Fed's policy moves.
Traders and investors have recently rushed headlong into U.S. government debt.
The large swings pose a challenge to investors reckoning with the highest yield levels in more than a decade.
That data led investors to lower the odds of another Fed interest rate hike this year.
Investors want the notes so badly they're willing to settle for a lower yield.
The prospect of a hawkish policy outlook has driven short-term Treasury note yields to their highest levels since March.
Bond traders expect the Fed to pull back on interest rates in the face of tightening credit conditions.
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