Treasurys sink on growing supply
Government bonds fall on large supply of debt after last week's $27 billion infusion into the market.
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| Bonds sank after last week's auction of $27 billion in government debt. |
NEW YORK (CNNMoney.com) -- Treasury prices fell Monday on a day devoid of any economic reports, as investors sold off after last week's multibillion-dollar bond auction.
The benchmark 10-year note fell 17/32 to 100, and its yield rose to 4%. Bond prices and yields move in opposite directions.
Meanwhile, the 2-year note fell 3/32 to 100 12/32 and yielded 2.55%. The 30-year long bond sank 1 6/32 to 98 4/32, with the yield rising to 4.61%.
"There was no economic news Monday, the dollar is holding and oil is not doing much of anything," said Peter Cardillo, chief market economist with Avalon Partners. "As a result, the bond market is experiencing a spillover from last week's auctions."
The U.S. Treasury Department auctioned off $10 billion in 30-year bonds on Thursday afternoon, after selling off $17 billion in new 10-year notes on Wednesday at a median yield of 4.05%.
Treasurys fell for much of last week in reaction to the auctions.
"Before an auction, the market always reacts to the state of the economy and inflation," said Cardillo. "With inflation remaining high and the economy in a slump, that's why bonds sold off earlier last week."
The Treasury's action was a response to the government's anticipated need to borrow $171 billion during the current third quarter, which would mark the second-highest quarterly debt in history. With expensive wars in Afghanistan and Iraq, the Bush administration last week projected the 2009 federal budget deficit will hit a record $482 billion.
The Treasury also offered more than $21 billion in notes and bonds in May.
"You would think we'd see a flight to quality with the situation in Russia, which would typically be good for bonds," said Cardillo. "But right now, investors are reacting to the supply factor." 
