Treasury prices on the rise
Stock decline helps send investors to credit market. Government continues to sell new debt.
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NEW YORK (CNNMoney.com) -- Government debt prices rose after three auctions Tuesday, as investors sought safety while the stock market slipped.
The Treasury Department sold $28 billion worth of four-week bills and $25 billion in 1-year bills.
The government also reopened a 10-year TIPS note - which protects investors against inflation - with a $6 billion offering late Tuesday. The Treasury received $13.5 billion in bids.
Stocks fell Tuesday, with the Dow Jones industrial average down almost 200 points with two hours left in the session, as investors feared the start of another grim corporate reporting period.
"Treasurys have reversed yesterday's losses in large part because stocks are under pressure, making investors nervous," said Peter Cardillo, analyst at Avalon Partners.
Stocks and bonds have mostly traded in opposite directions during the recession. Economic confidence leads investors to take on riskier stocks, while fear drives them to safe-haven bonds.
Busy auction week: An increased volume of Treasurys has come to market in recent months as the government looks to fund its various economic stimulus plans.
The government auctioned off $28 billion worth of 6-month bills and $30 billion worth of 3-month bills Monday.
The Treasury also plans to hold a $35 billion auction of 3-year notes Wednesday and the reopening of a 9 year, 10-month note auction Thursday, as well as other shorter-maturity auctions.
An increase in the supply of debt tends to knock down prices. But the stock market slip has overshadowed the Treasury sales.
"The market is going to be subject to a lot of supply, but a lot depends on what happens with equities over the next few days," Cardillo said. "If stocks remain lower, supply is less of a factor in bond prices."
On Monday, the Federal Reserve purchased $2.5 billion of longer-term debt. The purchase was part of the Fed's plan to buy $300 billion worth of Treasury debt over the next six months in an effort to drive down interest rates on consumer and business loans and help ease the credit crunch.
The Fed expects to hold two to three debt purchase operations per week over the next six months. It also plans to buy $750 billion in mortgage-backed securities.
Bond prices: The benchmark 10-year bond jumped 6/32 to 98 23/32, and its yield sank to 2.91%. Bond prices and yields move in opposite directions.
The 30-year bond rose 1/32 to 96, and its yield held even at 3.74%.
The 2-year note inched up 3/32 to 99-31/32, and its yield slipped to 0.92% from 0.96%.
The 3-month yield rose to 0.2% from 0.19%.
Lending rates: The 3-month Libor rate was 1.15%, down from 1.16% Monday according to Bloomberg.com. The overnight Libor rate inched up to 0.28% from 0.27%.
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 credit market gauges widened. The TED spread jumped to 0.99 percentage point from 0.96 point Monday. The narrower the TED spread, the more willing investors are to take risks.
The Libor-OIS spread jumped to 0.95 percentage points from 0.94 point. The narrower the spread, the more cash is available for lending. 
