Bonds prices close down on stock strength

NEW YORK (CNNMoney.com) -- Bond prices declined across the board Wednesday as the Federal Reserve pumped more money into the banking system to ease rate pressures.

The Fed announced Wednesday that it had added $2 billion of temporary reserves to the banking system through overnight repurchase agreements.

The yield on three-month Treasury bills, which have been the focus of the market this week, climbed to 3.65 percent from 3.58 percent late Tuesday, suggesting investors were no longer looking to the shorter-dated securities for safety. On Monday the yield on three-month bills posted the biggest drop since the stock market crash of 1987 as investors swooped in to buy up the securities. Bond prices and yields move in opposite directions.

Other shorter-term debt fell, with the two-year note declining 8/32 to yield 4.17 percent. The five-year note lost 14/32 to yield 4.36 percent.

The market's usual benchmark, the 10-year Treasury note, fell 12/32, or $3.75 on a $1,000 note, to yield 4.65 percent, up from 4.59 percent late Tuesday. The 30-year note fell 7/32 to yield 4.96 percent, up from 4.94 percent in the previous session.

After piling into the government bond market earlier this week, investors paused from their buying frenzy starting late Tuesday after a meeting among Senate Banking Committee Chairman Christopher Dodd, Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson helped calm nervous investors.

Following the meeting, Dodd said Bernanke pledged to use all the necessary tools to calm financial markets, but the lawmaker added that he did not pressure the central bank chief to cut interest rates.

Many on Wall Street and various economists have speculated the Fed will cut its key fed funds rate from its current 5.25 percent in a bid to calm financial markets, which have been on a roller-coaster ride due to widening troubles in the credit markets. The Fed on Friday cut its little-used discount rate, which applies to loans that go directly to banks, soothing markets as a result.

In currency trading, the dollar rose versus the yen, trading at ¥115.15, up from ¥114.42 Tuesday, while the euro bought $1.3541, up slightly from $1.3465 late Tuesday.