The Fed officials were quick to emphasize the economy's strengths, following news Friday that employers cut 4,000 jobs in August, confounding economists who had expected a gain of at least 100,000.

But price action Monday was more closely correlated to Friday's data than the day's speeches. The fixed-income market continued to view the jobs August data as a sign that weakness in the credit markets has filtered through the economy and the Federal Reserve will have no choice but to cut interest rates when it meets Sept. 18.

Still, Atlanta Fed President Dennis Lockhart said the August jobs report must be viewed in the context of recent strong retail sales data and other signs of economic health.

San Francisco Fed President Janet Yellen said the bank, in setting monetary policy, focuses more on the borrowing costs of households and businesses than on market volatility and pointed out that costs are little changed for prime borrowers. She also described the economy as having "weathered the storm."

Dallas Fed President Richard Fisher seemed to rebuke investors for trying to pressure the Fed.

"Conducting monetary policy is not a popularity contest," Fisher said, adding that correct course for Fed policy hasn't yet been determined. He said he hoped history would judge him as "having a steady hand rather than an itchy trigger finger."

An erratic day on Wall Street contributed to the gains in Treasurys, with investors lured by the relatively safety of bonds. The benchmark 10-year Treasury note closed up 16/32 at 103 13/32 with a yield of 4.27 percent, down from 4.42 percent late Friday.

The 30-year long bond finished 1 1/32 at 105-24/32, while its yield was 4.64 percent, down from 4.75 percent on Friday, as the 2-year note rose 4/32 to 100 with a 3.82 percent yield, down from 3.94 percent on Friday.

The yield on 3-month Treasury bills ended at 3.89 percent, down from 4.17 percent on Thursday, as the discount rate fell 0.05 percentage point to 3.90 percent.

Some investors have begun to speculate that the economy is headed for recession. However, a recession does not occur until there are two consecutive quarters of contraction and can't be determined by a single piece of data.

The preoccupation with avoiding risk also was fueled by worries about commercial paper. About $140 billion in short-term European commercial paper must be refinanced this week and it recently has been very difficult to find buyers for this debt.

The recent rallies in Treasurys, have driven yields, which move inversely to price, down to multi-month lows. The 2-year yield is now below 4 percent for the first time since September, 2005 and the 10-year yield at its weakest level since late January.

Market participants wonder whether further purchases this week will drive the 10-year yield through the 4.25 percent and 4.15 percent levels soon, according to Joel Marver, Chief Technical Analyst at Thomson IFR Markets, said. "While markets in general overshoot, the momentum seen currently does not lead us to conclude this move is anywhere near completed," he wrote.

The July consumer credit report came out after the close of trade and showed that consumers took on 3.7 percent more credit in July.

The preoccupation with avoiding risk also was fueled by worries about commercial paper. About $140 billion in short-term European commercial paper must be refinanced this week and it recently has been very difficult to find buyers for this debt.