NEW YORK (MarketWatch) -- Treasury prices headed higher Monday, pushing yields to new lows, before the government auctions $7 billion in inflation-indexed debt. The sale comes also with $60 billion in 3-month (UST3MO 0.09, 0.00, -4.44%) and 6-month bills (UST6MO 0.14, 0.00, -2.84%) , kicking off of week of heavy debt issuance which traders expect to limit gains. Ten-year note yields (UST10Y 3.22, +0.04, +1.16%) fell 2 basis points to 3.20%. The early gains, following a disappointing monthly employment report on Friday, follow "weekend press reports highlighted the tall task of returning the US economy to full employment," said Bill O'Donnell at RBS Strategies. "My one-month to three-month outlook for Treasurys remains bullish even though it does appear that rates may have fallen too far, too fast in the near-term."

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