Treasury prices fall as weak auction results, anticipation of Greece rescue hurt demand

Interest rates rise for 2nd day on weak auction

NEW YORK — Interest rates rose for a second day in the bond market after an auction of 10-year Treasury notes drew weak demand.

The lackluster response to the Treasury department’s sale Wednesday of $25 billion in 10-year notes hurt prices and drove up interest rates.

The bid-to-cover ratio, which measures demand, came in at 2.67. That’s below 3.00 at the previous auction.

The yield on the 10-year Treasury note that matures in November 2019 rose to 3.69 percent from 3.65 percent late Tuesday. Its price fell 11/32 to 97 13/32. The yield on the 10-year note is a benchmark for interest rates on mortgages and other consumer loans.

Demand for safe investments like Treasurys had already been weak ahead of the auction. For a second day, investors predicted that European Union countries would put together a financial rescue plan for Greece. The country has been struggling with rising debt loads.

There is concern that debt problems Greece and in Portugal, Spain and Ireland could spill into the world’s markets and threaten a rebound in the global economy. The stock market charged higher and interest rates rose on Tuesday as expectations of a financial bailout grew.

EU leaders and Jean-Claude Trichet, head of the European Central Bank, are scheduled to meet Thursday to discuss the economic health of nations that use the euro.

Short-term interest rates also rose after Federal Reserve Chairman Ben Bernanke on Wednesday detailed how the central bank will withdraw some of its supports for the economy. That would involve raising borrowing costs to stanch the flow of money into the economy and avoid inflation. Short-term rates are the most influenced by changes in Fed policy.

Questions about the prospects for Greece and about U.S. interest rates kept markets from making big moves. The Dow Jones industrial average fell 20 points after rising 150 on Tuesday.

The yield on the two-year note that matures in January 2012 rose to 0.89 percent from 0.84 percent. Its price fell 3/32 to 99 31/32.

The yield of the 30-year bond maturing in November 2039 rose to 4.64 percent from 4.58 percent. Its prices fell 27/32 to 95 23/32.

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