Treasurys hold gains after $44 billion auction
Prices rise on a weak consumer confidence report. The government sees strong demand for its $44 billion sale of 2-year notes.
NEW YORK (CNNMoney.com) -- Treasury prices rose Tuesday after a surprise drop in consumer confidence raised questions about the economic recovery, prompting investors to seek safety in government-backed debt.
Investors were also responding to strong results from a $44 billion auction of 2-year notes, which is part of this week's record $123 billion offering of U.S. debt.
The government received bids totaling $159.3 billion for the $44 billion worth of 2-year notes sold Tuesday. The bid-to-cover ratio, which gauges demand, was 3.63. That compares with 3.23 at the previous 2-year sale in September and a 2009 average of 2.84.
Indirect bidders, a category that includes foreign central banks, bought 44.5% of the securities.
The newly issued 2-year note had an auction price of 99 31/32 and a median yield of 0.98%.
Separately, a sale $28 billion in 1-month bills also drew above average demand Tuesday.
This week's record offering is the latest in a string of large debt sales the government has held monthly this year to help fund its economic stimulus efforts and service a growing budget deficit.
On Wednesday, the U.S. will auction $41 billion in 5-year notes and $31 billion in 7-year notes Thursday.
While demand for U.S. debt has been strong, many analysts worry that the growing supply of new issues could damp the market's appetite and eventually weigh on prices.
"The market has been strong this morning," said Ron Mark, a fixed-income trader at BMO Capital Markets. "Economic news has been more bond-friendly than expected, including consumer confidence."
Research firm Conference Board said its Consumer Confidence Index fell to 47.7 in October from an upwardly revised 53.4 in September. Economists were expecting the index to increase to 53.5, according to a Briefing.com consensus survey.
The dour consumer confidence numbers overshadowed a more upbeat report on the housing market.
The S&P Case-Shiller Home Price index of 20 cities rose a non-seasonally adjusted 1.2% in August. It was the fourth consecutive monthly increase and followed a 1.6% gain in July.
Home prices were down 11.3% versus August 2008, but that drop was less severe than expected. Analysts surveyed by Briefing.com had forecast an 11.9% year-over-year drop.
Bond prices. The benchmark 10-year note was up 30/32 to 101 14/32 and its yield slid to 3.452% from 3.554% late Monday. Bond prices and yields move in opposite directions.
The 2-year note edged up 6/32 to 100 5/32 with a yield of 0.94%.
The 30-year bond gained 1 16/32 to 103 22/32. Its yield was 4.28%.
The yield on the 3-month bill was 0.08%. 
