U.S. Treasury debt prices slipped on Monday, but volume was scant and analysts said the day's market action would be driven mostly by the stock market.

The yield on the benchmark 10-year Treasury note, which had fallen to 2.93 percent by Friday's close as stocks suffered their worst one-day drop since June, was trading at 2.95 percent, while its price was off by 6/32.

There is little economic data due out Monday to give Treasury traders guidance, and the most important scheduled event of the week is still two days distant.

Stocks were trading slightly higher on the day after slipping briefly into negative territory following a report on homebuilder sentiment in July that showed a lower-than-expected reading.

It's going to be more related to how equities perform given that Friday was such a messy day, said Rick Klingman, managing director of Treasury trading at BNP Paribas.

Volumes were light with Japan closed overnight, said Ian Lyngen at CRT Capital Group in Stamford , Connecticut.

We're at 41 percent of the 10-day moving average, said the senior government bond strategist.

Investors are awaiting testimony from Federal Reserve Chairman Ben Bernanke on Wednesday to the U.S. Senate Banking Committee as part of a semi-annual report to Congress on monetary policy. Treasury traders watch for clues on whether the Fed could embark on a second round of quantitative easing now data is showing more weakness in the U.S. economy.

Our general bias is that the market is going to continue to consolidate and trade in this lower-yield range, at least ahead of Bernanke, and as the summer doldrums continue to plague the market, Lyngen said. He added that while the 10-year yield could rebound to around 3.06 percent, it would likely not trade above 3.13 percent.

Traders dismissed a story from China in which a former central bank official advised the Chinese government to reduce the amount of dollars it holds in its currency reserves. China is one of the largest buyers of U.S. Treasuries. It uses the securities to manage its vast reserve of dollars, and any hints on China's Treasury purchasing plans can move markets. But the story, which market participants were circulating via email Monday morning, did not greatly impact prices.

Markets are looking for signs of a faltering U.S. housing recovery after weak consumer data at the end of last week.

U.S. housing starts data is to be released on Tuesday.

It just seems to me that this is the beginning of what will probably be a disappointing week for housing numbers, said Todd Colvin, vice president at MF Global in Chicago. Treasuries continue to be the wait-and-see investment of choice.

Colvin added that a Moody's downgrade of Ireland on Monday was also keeping Treasuries' price losses in check.

I wouldn't be surprised if we were still trading at 3 percent on Wednesday, he said.

The 30-year bond gave up 17/32 to yield 3.97 percent, up from 3.94 percent at Friday's close.

Two-year Treasury notes traded unchanged in price to yield 0.61 percent, up from 0.60 percent on Friday. The five-year note yield rose to 1.70 percent from 1.68 percent on Friday, while its price fell 3/32.

(Editing by Andrew Hay)

Japan China Ben Bernanke BNP Paribas