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Stock market rebound helps send Treasurys lower

January 14, 2010 | The Associated Press

Interest rates rise in bond market as Treasury prices fall; Investors follow rebound in stocks.

Interest rates rose in the bond market Wednesday as a rebound in stocks sent Treasury prices lower.

The slide came as gains in financial shares helped lift the overall stock market, decreasing investors' need for safe-haven Treasurys. The heads of several big banks testified before Congress about the financial crisis, and investors bought bank stocks as the hearing, while tense at times, wasn't as contentious as some feared.

Demand for Treasurys also fell after the Federal Reserve said the economy is reviving in more parts of the country, even as activity remains at a low level.

The yield on the 10-year Treasury note that matures in November 2019, which is a benchmark for interest rates for mortgages and other consumer loans, rose to 3.80 percent in late trading from 3.72 percent late Tuesday. Its price fell 20/32 to 96 18/32.

Meanwhile a Treasury Department auction of $21 billion in previously sold 10-year notes went relatively well. There were three times as many bids as there were notes on offer at the auction, the third of four Treasury sales this week.

The government sold $10 billion in 10-year inflation protected securities Monday and $40 billion in three-year notes Tuesday. Both auctions were well received as investors seek safety. The government will sell $13 billion in 30-year bonds on Thursday.

In other trading Wednesday, the price of the 30-year bond that matures in November 2039 fell 1 15/32 to 94 18/32, and its yield rose to 4.72 percent from 4.62 percent.

The yield of the two-year note that matures in December 2011 rose to 0.97 percent from 0.91 percent. Its price fell 3/32 to 100 1/32.

The yield on the three-month T-bill maturing April 15 rose to 0.05 percent from 0.03 percent. The discount rate was 0.05 percent.

The cost of borrowing between banks was unchanged. The British Bankers' Association said the rate on three-month loans in dollars -- the London Interbank Offered Rate, or Libor -- was at 0.25125 percent.

By Ieva M. Augstums, AP Business Writer

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