Treasury Prices Mostly Fall as Stocks Rise

Treasury prices dipped Tuesday as investors turned to stocks amid promising signs for a recovery.

Stock prices gained as investors were encouraged by takeover news from overseas. Rival mobile phone operators Deutsche Telekom and France Telecom said they will combine their British businesses to form the country's largest cell phone service. Meanwhile British candy maker Cadbury rejected an unsolicited takeover bid from Kraft Food Inc.

The Dow Jones industrial average rose for the third straight day, adding 56 points.

The step-up in deal activity was seen as a sign of growing confidence among businesses and reinforced views that the worst of the economic downturn was easing. As stocks move higher, investors typically sell out of safer investments such as government bonds.

In late trading, the price of the benchmark 10-year note fell 13/32 to 101 5/32, while its yield rose to 3.48 percent from 3.45 percent late Friday.

The 30-year bond fell 29/32 to 102 29/32. Its yield rose to 4.33 percent from 4.27 percent.

A government auction of $38 billion in new three-year notes was well-received. The bid-to-cover ratio, a measure of demand, was 3.02, easily topping the 2.89 ratio at the previous month's auction for similar notes.

The price of the three-year note slipped 2/32 to 100 26/32, and its yield rose to 1.46 percent from 1.44 percent.

The Treasury will offer $20 billion of 10-year notes and $12 billion of $30-year bonds later in the week.

In other trading, the two-year note was unchanged at 100 4/32, and its yield held steady at 0.93 percent.

The yield on the three-month T-bill rose to 0.13 percent from 0.12 percent. Its discount rate was 0.14 percent.

The cost of borrowing between banks dipped. The British Bankers' Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — fell to 0.30 percent from 0.31 percent.

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