"We're watching the equity market minute to minute. We've already rallied quite a bit this week. The market is very concerned about the condition of equities," said a governments trader Michael Pianin at Fuji Securities International.

Investors often park funds in Treasuries to escape falling stocks. The US technology share losses of nearly 25 per cent since Sept 1 and more modest declines by blue-chip stocks have helped send yields on two-and five-year notes, which move inversely with their price, to 10-month lows.In early trade, benchmark 10-year notes were up 3/32 at 99-23/32 to yield 5.79 per cent.

Two-year notes gained 1/32 to 100-5/32, yielding 5.92 per cent, and five-year notes rose 4/32 to 103-25/32 to yield 5.80 per cent.

The US Stock futures pointed toward declines for the opening bell on Wall Street.

Thirty-year bonds, trading near one-month highs in price, gained 3/32 to 106-7/32, yielding 5.81 per cent.

Traders were also watching a renewed push higher in crude oil costs, with longer dated Treasuries seen under potential pressure should a spike back toward decade peaks spur fresh inflation concerns. The US light crude oil futures traded around 60 cents higher near $34 a barrel amid forecasts for more cold spells in North America and continued tensions in the Middle East.

Traders said they would also be looking at Fannie Mae's sale of $9 billion of new two and seven-year notes on Wednesday. They said if stocks stabilise, it could cause losses in intermediate Treasuries. On the corporate front, Anglo-Dutch consumer goods giant Unilever Plc is expected to sell at least $7 billion of new debt as soon as this week, according to the company's treasurer.

Another $5 billion in new corporate supply is expected from Telecom Italia. In addition, Treasury plans to sell $5 billion in 30-year Treasury Inflation-Indexed Securities (TIIS) Wednesday.