Treasurys fall as market recovers
Prices for U.S. government debt retreat as investors focus on supply increase and volatile stocks.
NEW YORK (CNNMoney.com) -- Treasurys eased Tuesday amid concerns about growing supply and volatile stock prices.
Investors flocked to the safety of U.S. government debt Monday after insurance provider American International Group reported the largest quarterly loss in U.S. corporate history.
The news shook the stock market, with the Dow Jones industrial average sinking to its lowest level since 1997. But stocks recovered some ground in choppy trading Tuesday afternoon as wary investors ventured back into the market.
"Any time you see a bit of calm in risky asset markets you'll find that Treasurys fall," said Chris Currer, director of fixed-income trading at BMO Capital Markets.
U.S. Treasury issues are considered one of the most secure assets available and investors often buy them in droves when stock prices fall. When stock prices rise, however, Treasury prices typically fall as investors seek out higher returns in more risky markets.
Investors are also concerned about a major influx of supply as the government issues record amounts of debt to finance economic stimulus and financial rescue agendas.
On Thursday, the Treasury Department will announce details of auctions scheduled for next week.
"Buyer fatigue gets built into Treasury prices the closer you get to an auction," Currer said. "Underneath all of the panic is a serious concern about supply."
Treasurys prices: The benchmark 10-year note was up 17/32 to 98-14/32 and its yield rose to 2.94% from 2.87% late Monday.
The 30-year bond rose 24/32 to 97-6/32 and yielded 3.66%.
The 2-year note advanced 22/32 to 99-29/32 with a yield of 0.92%.
Lending rates: The 3-month Libor rate was unchanged from Monday at 1.27%, according to data on Bloomberg.com. The overnight Libor rate rose to 0.32% from 0.31%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
One credit market gauge indicated more confidence in the credit market, and one reflected a lack of liquidity. The "TED" spread narrowed to 99.93 percentage point from 1.01 percentage point Monday. The wider the TED spread, the less willing investors are to take risks.
The Libor-OIS spread widened to 1.02 percentage point from 1.01 percentage point. The wider the spread, the less cash is available for lending. 
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