By Sam Goldfarb 

U.S. government bonds held steady Monday amid ongoing concerns about Italy's budget standoff with the European Union.

The yield on the benchmark 10-year U.S. Treasury note settled at 3.196%, compared with 3.198% Friday.

Yields, which fall when bond prices rise, flirted with higher levels in the overnight session but slipped at the start of U.S. trading shortly after Italy's government said it wouldn't back down from its proposed budget despite warnings from the EU that it would be in violation of the bloc's fiscal rules.

The latest salvo in the political dispute provided a boost to German and U.S. debt while halting momentum for Italian government bonds, which had been rallying earlier after Moody's Investors Service downgraded Italy's credit rating late Friday but left its outlook "stable" rather than on watch for another downgrade.

Investors have been closely following the situation in Italy because of the immediate threat it poses to Europe's fourth-largest economy, as well as the long-term questions it raises about the viability of the eurozone.

Beyond Italy, there have been few clear catalysts for moves in Treasurys in recent days.

After a wave of selling pushed yields to multiyear highs earlier this month, the Treasurys market has shown signs of stabilizing, with the 10-year yield generally hovering between 3.1% and 3.2%.

"Rates are kind of just consolidating around current levels," said Mark Cabana, U.S. rates strategist at Bank of America Merrill Lynch.

Once the worst of the selling ended this month, it helped make investors "a little more confident to own the market," he added.

Write to Sam Goldfarb at sam.goldfarb@wsj.com

(END) Dow Jones Newswires

October 22, 2018 16:03 ET (20:03 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.