Treasurys slide ahead of Fed, auction details

Treasury prices fall ahead of rate decision from Federal Reserve; investors await auction data

• By Stephen Bernard, AP Business Writer
• On 5:33 pm EST, Tuesday November 3, 2009

NEW YORK (AP) -- Treasury prices continued to drop Tuesday as stocks reversed early losses. Trading was cautious ahead of announcements from the Federal Reserve on interest rates and details on the next round of auctions.

In late trading, the 10-year Treasury, often used as a benchmark for consumer borrowing, fell 14/32 to 101 8/32, pushing its yield up to 3.47 percent from 3.42 percent.

Kim Rupert, managing director of global fixed income analysis at Action Economics, said Treasury prices slipped as investors started to buy into the stock market. The Dow Jones industrial average ended with a modest loss of 18 points while broader indexes rose.

"Buying petered out as stocks came off their lows," Rupert said.

Rupert said long-term bonds were hit the hardest ahead of announcements for the next round of auctions. The Treasury Department will disclose on Wednesday the amount of three- and 10-year notes and 30-year bonds it plans to auction next week.

Treasurys were also under pressure because of uncertainty about what the Federal Reserve will say about the economy on Wednesday as it wraps up a two-day meeting on interest rate policy. Analysts widely expect the Fed will keep key interest rates at historical lows, but any details it provides about when it might start raising rates again could affect Treasury prices.

In other trading, the 30-year bond fell 1 7/32 to 102 24/32. Its yield rose to 4.33 percent from 4.26 percent.

The two-year note was flat at 100 5/32, while its yield slipped to 0.92 percent from 0.93 percent from late Monday.

The yield on the three-month T-bill fell to 0.04 percent from 0.05 percent. Its discount rate was 0.05 percent.

The cost of borrowing between banks slipped. The British Bankers' Association said the rate on three-month loans in dollars -- the London Interbank Offered Rate, or Libor -- dropped to 0.27813 percent from 0.27938 percent.

Buzz up!