(Bloomberg) -- The Treasury market built upon its biggest weekly advance of the year as Morgan Stanley strategists predicted additional gains.

While yields were little changed, most remain lower by 10 basis points to 20 basis points over the past week, which included a Federal Reserve meeting and US economic data that partially restored expectations for at least two interest-rate cuts this year. The market had its worst month of the year in April as those expectations collapsed.

Read More: Treasury Rally Risks Running Into a $125 Billion Brick Wall

The yield on two-year Treasuries is down almost 20 basis points over the past week, hovering around 4.8% on Monday. The 10-year note’s yield has fallen about 15 basis points in the same period, since the close of April 26, to linger near 4.5%.

Morgan Stanley strategists in research published over the weekend advised investors to “buy bonds” based on their view that inflation will slow rapidly after stalling during the first three months of the year.

Read More: Morgan Stanley Says ‘Buy Bonds,’ Inflation Will Retreat

“The Treasury market had swung too far toward bearishness and is now correcting,” said Kathy Jones, Charles Schwab’s chief fixed-income strategist. “We are positive on Treasuries and continue to see two rate cuts by the Fed this year.”

To be sure, Wall Street remains divided about whether expectations for Fed rate cuts are reasonable. Strategists at Barclays Plc recommended selling August futures on the federal funds rate, saying it prices in too high a chance of a Fed rate cut by July. Investors are extrapolating too much from last week’s weaker-than-anticipated April employment data, they said. 

At the same time, bond dealers are gearing up for a set of three Treasury auctions this week that may put upward pressure on yields. The sales of three- and 10-year notes and 30-year bonds totaling $125 billion are slated to begin Tuesday. 

As measured by the Bloomberg Treasury Index, the market produced a 2.3% loss in April and a 1% gain last week.

“The market was extremely oversold,” said Earl Davis, head of fixed income and money markets at BMO Global Asset Management. “But the underlying reason that drove yields higher is still there,” and likely to reassert itself, he said. 

Read More: At $2 Million Per Minute, Treasuries Mint Cash Like Never Before

©2024 Bloomberg L.P.