NEW YORK (CNN/Money) -
Treasurys rallied Tuesday as the Federal Reserve left interest rates steady at four-decade lows and its statement proved less upbeat than bond investors had feared.
Right before 4 p.m. ET, the benchmark 10-year note jumped 5/8 of a point to 100-3/8, pushing its yield down to 4.20 percent from 4.26 percent late Monday. The 30-year bond jumped 17/32 of a point to 103-15/16, sending its yield down to 5.11 percent from 5.14 percent late Monday. Bond yields and prices move in opposite directions.
Two-year notes rose 3/16 of a point to 99-29/32 with a yield of 1.68 percent, while the five-year note jumped 7/16 of a point to 100-1/8 with a yield of 3.10 percent.
In the currency market, the dollar rose against the euro but slid versus the yen. The euro bought $1.1670, down from $1.1747 late Monday. The dollar bought ¥108.31, down from ¥108.55 late Monday.
The Federal Reserve Open Market Committee (FOMC) held the federal funds rate, an overnight bank lending rate that affects other key bank rates, at 1 percent -- the lowest in more than 42 years -- as many economists expected.
But the Fed policy makers also said they still were concerned about a drop in inflation despite signs of strength in the world's largest economy, which gave a lift to bonds.
Earlier in the day, the durable goods orders rose 0.8 percent in September, slightly below forecasts of a 1.4 percent gain. However, that was more than compensated for by a huge revision to August, which left orders down just 0.1 percent from an initial 1.1 percent fall.
The breakdown also was healthy. Excluding transportation, orders were up 1.2 percent, while non-defense capital goods excluding aircraft, a proxy for business investment, jumped 3.9 percent.
Also during morning trading the Conference Board, a business research group based in New York, said its closely watched index of consumer confidence rose to 81.1 from a revised 77 in September. Economists, on average, expected the confidence index to rise to 79.3, according to Briefing.com.
Reports on personal income and spending, consumer sentiment, and manufacturing all are due later in the week.
The bond market prepared to absorb a fresh Treasury supply this week. The Treasury is expected to auction $25 billion of new two-year notes Wednesday and, as usual, traders will treat it as a litmus test for the foreign appetite for U.S. assets.
A larger-than-expected rise in Germany's Ifo business climate index did little to buoy the euro.
"A positive Ifo is not necessarily positive for the euro, since it is a defensive currency," Aziz McMahon, currency strategist at ABN Amro in London, told Reuters. "The euro does well when global prospects are dim."
-- Reuters contributed to this story.
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