Government securities rallied on Monday, as fixed-income investors bet on a weak employment report this Friday.

The 30-year Treasury bond yielded 6.67%, eclipsing the previous record closing low of 6.70% set on Friday. Ten-year Treasury notes yielded 5.78%, down from 5.80%, and two-year notes yielded 4.06%, down from 4.07%.

The lower interest rates helped stocks but hurt the dollar. The Dow Jones industrial average advanced 39.31 points, to 3,530.20. The dollar fell to 1.6947 German marks and 106.15 yen from 1.7055 marks and 106.20 yen.

Astrid Adolfson, an economist with MCM Money Watch, said the bond market is looking for a 135,000 to 140,000 increase in nonfarm payrolls in June. This would be a sharp reduction from May, when the economy added 209,000 jobs.

Leftover |Good Feeling'

"There was a carry-forward of good feeling from last week," when the bond market rallied on a weaker-than-expected report on new orders for durable goods, she said.

Ms. Adolfson added that buying from municipalities and from abroad also helped the intermediate sector.

A $1 billion Eurobond from Tokyo Electric was swapped into 10-year Treasuries, market participants said.

New supply will be light over the next few weeks, with only the regular weekly auctions of Treasury bills expected.

The Treasury on Monday sold a total of $24 billion in three-and six-month bills. The average discount rate on the three-month bill was 3.05%, down from 3.10% last week. On the six-month bill, the average rate was 3.14%. down from 3.19%.

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