Treasury prices ease

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NEW YORK (CNNMoney.com) -- Treasurys drifted lower Tuesday as investors responded to a stronger than expected report on the housing market and a slower decline in regional manufacturing activity.

The S&P/Case-Shiller Home Price index, which measures prices in 20 major U.S. markets, recorded a drop of 0.6% from March to April, compared with a 2.2% drop in the prior month.

Prices were down 18.1% versus last year. Economists had forecast a 18.6% decline.

Separately, the Institute for Supply Management-Chicago business barometer rose to 39.9 from 34.9 the month before. Analysts had expected the index to rise to 39.0.

The better than expected housing and manufacturing data helped undermine demand for U.S. debt as a safe haven. But not all of Tuesday's economic news was positive.

The Conference Board's index of consumer confidence fell to 49.3 from a downwardly revised 54.8 in May. The reading was weaker than expected. Economists surveyed by Briefing.com had expected the index to rise to 55.3.

On Wall Street, investors took the unexpected drop in consumer confidence as an opportunity to step back after a strong second quarter. Stocks ended lower with the Dow industrials off 82 points by the end of the session.

Prices for U.S. debt mostly fell during the first half of 2009, with the yield on the benchmark 10-year note climbing from roughly 2.4% at the beginning of the year to a high near 4% earlier this month. Bond prices and yields move in opposite directions.

Bond prices: The benchmark 10-year note was down 16/32 to 96-19/32, and its yield rose to 3.54% from 3.49% Monday.

The 30-year bond fell 27/32 to 98-18/32 and yielded 4.34%.

The 2-year note slid 1/32 to 100-1/32 and its yield was 1.13%

The 3-month bill edged down to 0.19%.

Lending rates: Interbank lending rates remained near record lows, suggesting the credit markets have become less constrained.

The three-month Libor held steady Tuesday at a record low of 0.60%, according to Bloomberg.com. The overnight Libor rate ticked up to 0.28% from 0.26%.

The London Interbank Offered Rate -- or Libor -- is a daily average of rates that 16 different banks charge each other to lend money. The closely watched benchmark is used to calculate adjustable-rate mortgages. More than $350 trillion in assets are tied to Libor.