Treasurys slide as stocks pop
Government debt prices fall as Wall Street rallies. Libor rate falls to a record low.
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| Click on the chart to see other government bond prices and yields. |
NEW YORK (CNNMoney.com) -- Treasury prices dropped Monday as investors digested a triple-digit rally on Wall Street and another purchase operation by the government.
Meanwhile, a key short-term lending rate fell to a record low as banks become increasingly willing to lend to each other.
The Dow Jones industrial average ended up 235 points Monday. Stocks have been trending mostly higher for the past two months, save for a pullback last week, as investors bet the economy is headed toward recovery.
Stock and bond prices typically move in different directions. As investors become more confident in the economy, they tend to move assets out of the safe haven of government debt and into riskier assets, such as stocks, that potentially offer higher yields.
Monday's rally on Wall Street was supported by a rally in overseas markets and better-than-expected quarterly earnings from home improvement retailer Lowe's (LOW, Fortune 500).
Also weighing on Treasury prices is the government's issuance of amounts of debt to fund its massive bailout for the economy. The volume of new issuance pushed debt prices mostly lower.
But without any longer-maturity debt auctions scheduled for the next few days, supply concerns took a backseat to increased risk appetite. On Thursday, the Treasury will announce how much 2-year, 5-year and 7-year debt the government plans to sell next week.
In an effort to combat rising yields, the Treasury embarked on a campaign to buy back $300 billion worth of its own debt. On Monday, the Federal Reserve also bought $3.2 billion worth of debt that matures between August 2019 and February 2026. The demand kept a floor under debt prices.
Bond prices: The benchmark 10-year note fell 21/32 to 99 7/32, and its yield rose to 3.22%. Bond prices and yields move in opposite directions.
The 30-year bond fell 1 22/32 to 101 5/32, and its yield increased to 4.18% from 4.08%.
The 2-year note edged down 3/32 to 99 30/32, and its yield rose to 0.92%. The yield on the 3-month rose to 0.17% from 0.16%.
Lending rates: A key bank-to-bank lending rate fell to another all-time low Monday, a positive sign for the credit markets.
The 3-month Libor fell to 0.78% Monday from 0.83% Friday, according to Bloomberg.com. Two weeks ago, the 3-month rate dropped below 1% for the first time since 1986, when the British Bankers Association started keeping records. The overnight Libor rate was nearly unchanged at 0.22%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London. The closely watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor. 
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