Shorter-dated Treasuries were stronger ahead of speeches by Federal Reserve officials amid speculation that the overall tone could be slightly dovish. Two-year yields were off 2.1bp at 4.833 per cent.

But strategists warned against expecting any significant rally in short-dated paper since a further quarter-point interest rate rise is almost fully priced in for the Fed’s next meeting in May. This would take the Fed funds rate to 5 per cent, making it very likely the two-year yield will follow suit.

Eurozone government bonds remained on the back foot as investors positioned themselves for further rate rises by the European Central Bank, which meets on Thursday.

While a move is not expected at this meeting, the market is pricing in the chance of another rate rise as early as May following recent strong economic data.

In late trade the yield on the 10-year Bund was up 3bp at 3.839 per cent.

Gilts recovered from an early sell-off, but the overall performance was mixed.

Longer-dated bonds rallied, helped by strong demand for £2bn of 50-year conventional bonds. The paper was sold at a yield of 3.96 per cent and received bids worth 1.72 times the amount on offer.

Fifty-year yields were 1.3bp lower at 3.957 per cent as London traders headed home. Two-year yields, however, were up 1bp at 4.471 per cent. Data showing a steep jump in home equity withdrawal fuelled speculation that any consumer boom would have to be curbed by rate rises.

Japanese government bonds rose, sending the yield on the benchmark 10-year bond down 0.5bp to 1.840 per cent as stock market falls outweighed the impact of a weak sale of new 10-year notes.

Demand for the new paper was soft, despite the 1.8 per cent coupon – the highest since August 2004. Strategists said investors were cautious ahead of a Bank of Japan meeting next week which could give further clues as to the timing of any rise in interest rates.