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Treasury prices fall as stock market breaks slide

January 26, 2010 | The Associated Press

NEW YORK (AP) -- Interest rates rose in the bond market Monday as stocks broke a three-day slide.

The gain in stocks lowered demand for safe havens like Treasurys. Investors also sold Treasurys ahead of an auction of $44 billion in two-year notes on Tuesday. Yields rose as Treasury prices fell.

The Treasury Department's offering of two-year notes precedes other auctions this week. The government also plans to sell $42 billion in five-year notes on Wednesday and $32 billion in seven-year notes on Thursday.

Prices often fall ahead of Treasury auctions, which will add supply to the market.

The yield on the 10-year Treasury note that matures in November 2019, a benchmark for interest rates on mortgages and other consumer loans, rose to 3.63 percent in late trading from 3.61 percent late Friday. Its price fell 6/32 to 97 28/32.

The yield on the five-year note rose to 2.37 percent from 2.35 percent on Friday.

The stock market posted modest gains as prospects grew that Federal Reserve Chairman Ben Bernanke would be reappointed to a second term. His term ends Sunday.

Doubts about whether the Senate would sign off on another four-year term emerged last week and unnerved many investors who don't want to see a shift away from low interest rates while the economy remains weak. But on Monday, Sens. Max Baucus of Montana and Dianne Feinstein of California were among those who said they planned to vote for Bernanke's confirmation. A vote is expected later in the week.

The questions come as Fed policymakers prepare for the first gathering of the year on interest-rate policy. A two-day meeting of the central bank's rate-setting committee starts Tuesday.

The yield of the 30-year bond that matures in November 2039 rose to 4.55 percent from 4.54 percent, while its price fell 6/32 to 97 5/32.

The yield on the two-year note maturing in December 2011 rose to 0.83 percent from 0.80 percent, and its price slipped 1/32 to 100 11/32.

The yield on the three-month T-bill that matures April 22 was flat at 0.04 percent. Its discount rate was 0.05 percent.

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