(Bloomberg) -- US bond traders are set to face an opening gap lower in Treasury yields when the cash market reopens from a US holiday for the Asian session.

The futures market, open for usual hours on Monday, surged in a flight-to-quality bid driven by the impact of conflict in the Middle East. In Nasdaq trading, exchange—traded funds tracking Treasuries also got a lift as the US stock market was bolstered by dovish comments from central bank officials.

The 10-year note contract was higher by around 30 ticks as of 2:30 p.m. in New York, indicating the yield on 10-year notes to open lower by approximately 15 basis points versus Friday’s 4.80% close.

Treasury futures took their lead from core European rates, which rallied hard on the day. German 10-year yields closed lower by 11 basis points while UK gilts were richer by almost 10 basis points in the sector.

Among ETFs, the iShares 20+ Year Treasury Bond ETF (TLT) climbed as much as 1.9% in its biggest intraday gain since August. Still, the world’s largest long bond ETF is mired in its worst drawdown on record, down roughly 50% from its 2020 highs.

Monday’s risk-off backdrop also took some Federal Reserve rate hike premium off the table, with around 5 basis points of rate hikes priced for the November meeting, around 20% of a 25-basis point move priced, down from 9 basis points priced at Friday’s close. Fed comments over the session also leaned dovish, further supporting Treasury futures and pressured the US dollar lower. Dallas Fed President Lorie Logan said higher yields may mean less need for rate hikes, while Fed Vice Chair Philip Jefferson said officials are “in a position to proceed carefully in assessing the extent of any additional policy firming that may be necessary.”

Price action on the day was on thin trading volumes. As of 2:30 p.m. New York futures were running at around 35% of usual 20-day average levels.

--With assistance from Emily Graffeo.

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