Treasury prices fall after disappointing auction

By Associated Press
Posted Dec. 28, 2010 at 2:07 p.m.

Treasury prices dropped Tuesday after results of the government’s $35 billion auction of long-term bonds disappointed traders.

The price of the 10-year Treasury note lost $1 per $100 invested in afternoon trading. Its yield, which moves in the opposite direction, rose to 3.46 percent from 3.34 percent late Monday.

“The market was a little leery of the auction today, justifiably so it turns out,” said Mike Wallace, global market strategist at Action Economics.

The Treasury Department sold $35 billion in five-year notes on Tuesday, but demand was weaker than expected. That follows a strong $35 billion sale of two-year notesĀ  Monday. A $29 billion auction of seven-year notes is set for Wednesday.

Investors mostly ignored reports showing home prices on the decline again and consumer confidence waning last month. Poorer economic news typically boosts Treasury prices as traders seek safer investments.

Yields have been increasing since November, even after the Federal Reserve launched a bond-buying program aimed at lowering interest rates. Investors are betting on better economic growth and higher inflation. The yield on the 10-year note traded at as low as 2.49 percent on Nov. 4.

In other trading, the 30-year bond fell $1.97, increasing the yield to 4.53 percent from 4.40 percent the day before. The yield on the two-year Treasury note rose to 0.75 percent from 0.65 percent.

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