Treasurys fall ahead of auctions

NEW YORK (CNNMoney.com) -- Treasurys prices fell Friday as investors braced for an onslaught of new supply headed to market next week and stocks held onto small gains in a late-session rally.

The Treasury Department announced Thursday that it plans to auction $34 billion in 3-year notes, another $18 billion in 10-year notes and $11 billion in 30-year bonds next week. Last week, the government auctioned a record $94 billion.

The auctions come as the U.S. government is set to pay $787 billion for stimulus, $700 billion for the bank bailout and trillions more in various liquidity programs.

As the government floods the market with supply, investors worry that prices will continue to fall. At the same time, increased government spending has some analysts concerned about inflation, which erodes the value of fixed-income investments.

Meanwhile, the market is also mindful of the weakness in the economy and in global stock markets, both of which continue to create demand for the safe haven of government debt.

A total of 651,000 jobs were lost in February, bringing the tally for the past six months to more than 3.3 million, according to the Labor Department's monthly jobs report. The unemployment rate rose to 8.1% - the highest level since December 1983.

Treasury prices were mixed when stocks were lower. Stocks slumped after opening higher, with Dow and S&P 500 touching 12-year lows, but Wall Street ended the day modestly higher.

European markets and Asian stocks closed lower.

"With the equity markets being the way they are, the name of the game is safety," said Peter Cardillo, chief market strategist at Avalon Partners in New York.

Treasury notes are considered one of the most secure assets available. As a result, demand for Treasurys often rises when investors are more concerned about protecting wealth than making a profit.

Treasury prices: The benchmark 10-year note reversed its earlier course to be down 19/32 to 98-28/32 and its yield rose to 2.89% from 2.83% late Thursday. Bond prices and yields move in different directions.

The 2-year note edged down 5/32 to 99-27/32 with a yield of 0.97%.

The 30-year bond sank 1-13/32 to 98-27/32 and yielded 3.57%.

The Federal Reserve has said in recent policy statements that it could purchase longer-dated Treasurys to help improve conditions in the private credit market.

Lending rates: The 3-month Libor rate rose to 1.29% from 1.28% on Thursday, according to data on Bloomberg.com. The overnight Libor rate was unchanged at 0.32%.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.

Two key gauges of the credit market were mixed. The "TED" spread narrowed to 1.08 percentage points from 1.10 percentage point Thursday. The more narrow the TED spread, the more willing investors are to take risks.

The Libor-OIS spread held steady at 1.03 percentage point. The wider the spread, the less cash is available for lending.