Interest rates remain higher after moderate demand at auction of 10-year notes

Interest rates higher after 10-yr note auction

CHARLOTTE, N.C. — Interest rates climbed in the bond market Wednesday as positive exports data raised expectations about the U.S. economy.

An auction of new 10-year notes drew mixed results.

Improved economic news from the Commerce Department helped reassure investors that the recovery is continuing. Stocks rose, with the Dow closing up 148 points, reducing demand for safe investments like Treasurys.

The yield on the 10-year Treasury note that matures in February 2020 rose to 3.58 percent in afternoon trading Wednesday from 3.53 percent late Tuesday. Its price fell 40.625 cents to $100.375. Bond yields rise when their prices fall.

The yield on the 10-year note is often used as a benchmark for setting interest rates on consumer loans and mortgages. It has dipped over the past month after briefly rising to 4 percent in April, its highest level since June.

The dip in Treasury prices comes as the government auctioned $24 billion in new 10-year notes.

Prices remained lower after the afternoon auction, which drew fairer demand than auctions for notes with similar maturities in recent months. The bid-to-cover ratio, a measure of demand, was 2.96. It was 3.72 and 3.45 for $21 billion in 10-year notes sold in April and March, respectively. It was better than the 2.67 ratio at the February auction.

The auction was the second of three this week. A sale of $38 billion in three-year notes Tuesday drew strong demand. The government is selling $16 billion in 30-year bonds on Thursday.

Improved economic news sent investors into stocks and dampened demand for Treasurys. The Commerce Department said exports jumped in March to their highest levels since 2008. That bodes well for the manufacturing industry, which has improved in recent months.

In other trading, the yield on the 2-year note that matures in April 2012 rose to 0.87 percent from 0.84 percent, while its price fell 6.25 cents to $100.25.

The yield on the 5-year note that matures in April 2015 rose to 2.28 percent from 2.24 percent. Its price fell 21.875 cents to $101.

The yield on the 30-year bond that matures in February 2040 rose to 4.48 percent from 4.42 percent. Its price fell 90.625 cents to $102.375.

The yield on the three-month Treasury bill that matures August 12 was unchanged at 0.15 percent. Its discount rate was 0.16 percent.