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Treasurys ease in quiet trading

January 20, 2010 | "CNNMoney"

NEW YORK (CNNMoney.com) -- Treasurys fell in a quiet trading session Tuesday as investors continued to digest last week's $84 billion offering of U.S. debt.

What prices are doing. The 10-year note was down 5/32 to 97-11/32 and its yield rose to 3.7% from 3.68% on Friday. Bond prices and yields move in opposite directions.

The 2-year note eased 2/32 to 100-6/32 and yielded 0.89%. The 30-year bond was unchanged from Friday at 96-20/32. Its yield was 4.58%.

U.S. financial markets were closed Monday for the Martin Luther King, Jr. holiday. Treasurys had advanced Friday amid concerns about the pace of the economic recovery. In times of uncertainty, investors tend to stick with government-backed bonds, which are seen as safer bets than higher-yielding equities.

What's moving the market. As part of its quarterly refunding, the government sold $84 billion worth of 3-, 10- and 30-year debt last week.

The auctions were well received, but the market was still working to "distribute" the new issues Tuesday, said Ron Mark, a fixed-income trader at BMO Capital Markets.

"We got a fair amount of supply last week, and I think there's still a bit of hangover from that," Mark said.

Meanwhile, the government said net foreign purchases of long-term U.S. securities were $129.3 billion in November. That compares with $20.7 billion in October.

The monthly Treasury International Capital (TIC) report also showed that foreign investors continue to have a healthy appetite for U.S. debt. The United Kingdom bought more than $50 billion worth of Treasurys in November. China, the largest holder of U.S. debt, purchased $15 billion worth of Treasurys in the month.

What analysts are saying. "This market has been driven by supply and newsworthy items, and we're not getting much of any right now," said Kevin Giddis, director of fixed-income trading at Morgan Keegan.

Giddis said traders are keeping an eye on the election for the U.S. Senate in Massachusetts. The outcome of that race could impact Congresses' ability to pass a major health care reform bill, which could "indirectly affect perceived economic growth," he said.

By Ben Rooney, staff reporter

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