Bonds: Yields drop despite Fedspeak, stronger than expected US data

These were the movements in the most widely-followed 10-year bond yields:

US: 1.84% (-2bp)

UK: 1.43% (-1bp)

Germany: 0.14% (-3bp)

France: 0.48% (-3bp)

Italy: 1.36% (-1bp)

Spain: 1.47% (-2bp)

Greece: 7.27% (+1bp)

Japan: -0.1% (+1bp)

Portugal: 3.06% (-1bp)

Risk aversion was the name of game at the start of the holiday-shortened trading week both in the UK and the US, as traders digested an apparent policy hint from Fed chair Janet Yellen herself made on 27 May.

During an interview at Harvard University, Yellen said it was "appropriate for the Fed to gradually and cautiously increase our overnight interest rate over time,” adding that such a move would probably be appropriate in the coming months.

Some analysts appeared to take her words to mean that an interest rate hike was indeed a possibility in coming months, but perhaps even as far out as September´s policy meeting.

However, speaking on Monday St. Louis Fed president James Bullard appeared to have either a June or July rate hike in mind.

"My sense is that markets are well-prepared for a possible rate increase globally, and that this is not too surprising given our liftoff from December and the policy of the committee which has been to try to normalise rates slowly and gradually over time," he said on the sidelines of a gathering in Seoul.

"So my ideal is that if all goes well this will come off very smoothly," he added.

Despite those remarks, and figures showing a 1.0% month-on-month jump in personal consumption expenditures for April - the biggest increase in almost seven years - the yield on the benchmark two-year US Treasury note fell by four basis points to 0.87%.

Earlier in the session, the yield on the benchmark 10-year US Treasury note had risen by as much as four basis points.