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Treasurys advance on earnings concern

January 13, 2010 | "CNNMoney"

Treasury prices rose Tuesday as worries about corporate profits stoked demand for the safety of U.S. debt ahead of a $40 billion offering of 3-year notes.

What prices are doing: The benchmark 10-year note was up 27/32 at 97-7/32, and the yield fell to 3.72% from 3.81% late Monday. Bond prices and yields move in opposite directions.

The 30-year bond rose 1-19/32 to 96 and its yield fell to 4.63%. The 2-year note increased 2/32 to 100-6/32 and yielded 0.91%.

What's driving prices: Overseas markets tumbled and U.S. stocks fell as investors continued to digest weaker-than-expected financial results from Alcoa late Monday.

The aluminum maker's slim fourth-quarter profit missed Wall Street's expectations and raised concerns that the corporate reporting period could be lackluster.

Investors also digested a monthly report that showed that the number of job openings fell in November.

Meanwhile, the Treasury Department sold $40 billion worth of 3-year notes Tuesday as part of an $84 billion offering of U.S. debt. The Treasury Department said it received bids totaling $119 billion, which made for a bid-to-cover ratio of 2.98, which was an improvement over the 2009 average of 2.72.

Later in the week, the government will sell 10-year notes and 30-year bonds.

What analysts are saying: Dan Greenhaus, chief economic and bond strategist at Miller, Tabak & Co., said the bond market is benefiting from a flight to quality.

"Global equity markets are turning down and futures are negative," Greenhaus said. "Alcoa's earnings weren't the best, and I think that's the main factor today."

He said ongoing improvement in financial markets worldwide could eventually begin to undermine demand for Treasurys as investors seek out higher yielding assets.

By Ben Rooney

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