Bond yields rise as investors return to stocks

By IEVA M. AUGSTUMS

posted: 8 HOURS 39 MINUTES AGO

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CHARLOTTE, N.C. -Interest rates rose in the bond market Tuesday after investors moved back into stocks and a three-year note sale generated less demand.

Bonds also lost some of their safe-harbor appeal as European officials appeared to be moving closer to a solution for Greece's debt crisis. Bond and stock investors have been concerned that Greece's fiscal troubles could undermine Europe's common currency, the euro, and destabilize debt markets.

The Dow Jones industrial average gained 150 points, back above the psychological barrier of 10,000. It closed below 10,000 on Monday for the first time since Nov. 4.

The yield on the 10-year Treasury note that matures in November 2019 rose to 3.65 percent from 3.57 percent late Monday. Its price fell 22/32 to 97 24/32. That yield is a widely used benchmark for consumer loans including mortgages.

Expectations of a bailout for Greece helped global markets bounce back. Reports that European Central Bank President Jean-Claude Trichet is changing his travel schedule to attend a meeting of EU officials Thursday where the Greek debt crisis will be discussed.

Meanwhile, investors showed less of an appetite for shorter maturities.

Smaller-than-recent-average demand at a Treasury Department sale of $40 billion in three-year notes also dampened investor interest in bonds.

The bid-to-cover ratio, a measure of demand, came in 2.83, lower than the 2.98 in an auction for notes with a similar maturity in January and in December.

The yield on the three-year note that matures in January 2013 rose to 1.34 percent from 1.26 percent, while its price fell 7/32 to 100 3/32.

In other trading, the yield on the two-year note that matures in January 2012 rose to 0.84 percent from 0.77 percent, while its price fell 4/32 to 100 2/32.

The yield of the 30-year bond maturing in November 2039 rose to 4.58 percent from 4.50 percent. And its price fell 1 10/32 to 96 20/32.

The yield on the three-month T-bill that matures May 13 fell to 0.09 percent from 0.10 percent. Its discount rate stood at 0.10 percent.

2010-02-09 17:17:48