The Federal Reserve, acting to keep markets functioning in turbulent times, has cut interest rates sharply following attacks on targets in New York and Washington last week.
In a statement, the Fed said it was cutting the closely watched federal funds rate to 3 per cent from 3.50 per cent, its eighth rate cut this year.
The largely symbolic discount rate was also eased, to 2.5 per cent from 3.0 per cent.
The Fed also said it believed the US economy continued to face a bigger risk from weakness ahead than from a possible surge in inflation, signalling it stood ready to make more cuts.
US Treasury bonds extended their losses to a full point after the rate cut eased some of the uncertainty surrounding the reopening of the U.S. stock market.
The Fed, acting to keep markets functioning in times of turbulence, cut rates sharply in the aftermath of terror attacks on targets in New York and Washington last week.
The Treasury market had rallied last week in part on expectations that the Fed could cut interest rates to ease fears of a sharp stock market sell-off after a nearly four-day suspension of equity trading.
At 8:40 a.m. (1240 GMT), two-year notes were down 2/32 to 101-11/32, yielding 2.91 percent.
Five-year notes were down 9/32 to 103-3/32, yielding 3.89 percent. Ten-year notes were down 13/32 at 103-2/32, yielding 4.61 percent.
Thirty-year bonds were down 28/32 to 99-14/32 to yield 5.41 percent.