Treasurys Little Changed Despite Strong TIPS Sale

Treasury prices were little changed Monday as investors balanced strong results of an auction of inflation-protected bonds against a rising stock market, which sapped demand for safe-haven investments.

The price of the benchmark 10-year Treasury note slipped 1/32 to 103 11/32. Its yield rose to 3.23 percent from 3.22 percent late Friday. The yield on the 10-year note is closely tied to interest rates on consumer loans.

Demand was strong for the 10-year inflation-protected Treasury securities at an auction Monday. Investors have become more concerned about long-term inflation recently as the government spends heavily to stimulate the economy.

The auction's bid-to-cover ratio, a measure of demand, was 3.12. An auction in July for similar TIPS, as the securities are known, had a bid-to-cover ratio of 2.51.

Strong auction results have bolstered Treasury prices in recent months. Monday's results helped offset a rise in the stock market.

Stocks rose after a report showed the services sector grew for the first time in more than a year. The Institute for Supply Management said its service index rose to 50.9 in September from 48.4 in August. Any reading above 50 indicates growth.

The closely watched index tracks more than 80 percent of the country's economic activity. It hadn't shown growth since August 2008.

Gains in financial companies also buoyed stocks after Goldman Sachs Group Inc. raised its rating on national banks. All the major stock indexes rose at least 1 percent.

The price of the 30-year bond fell 11/32 to 108 12/32, while its yield rose to 4.02 percent from 4.00 percent.

In other trading, the price of the two-year note was unchanged at 100 7/32 and its yield held steady at 0.88 percent.

The yield on the three-month T-bill fell to 0.07 percent from 0.09 percent and its discount rate stood at 0.08 percent.

The cost of borrowing between banks remained flat. The British Bankers' Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — was unchanged at 0.28 percent.

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