Treasurys mixed after auction

NEW YORK (CNNMoney.com) -- Treasurys were mixed late Wednesday following the government's $21 billion offering of 10-year notes and after the Federal Reserve said economic activity is weak but recovering.

What prices are doing: The benchmark 10-year note was down less than 1/32 at 96-19/32, and the yield rose to 3.78% from 3.72% late Tuesday. Bond prices and yields move in opposite directions.

The 30-year bond was up less than 1/32 to 94-20/32 and its yield was 4.72%. The 2-year note was flat at 100-2/32 and yielded 0.96%.

What's moving prices: Investors submitted bids totaling $63 billion at Wednesday's auction of reopened 10-year notes. The bid-to-cover ratio, a measure of demand, was 3. That compares with 2.62 at the last 10-year sale in December.

It was the second of three auctions this week aimed at selling $84 billion worth of U.S. debt. On Tuesday the government received solid demand at its sale of 3-year notes. On Thursday, it will auction $13 billion worth of reopened 30-year bonds.

Meanwhile, the Fed's reading on the economy, known as the Beige Book, said that while the economy remains weak, conditions are improving.

Separately, the Treasury posted a deficit of $91.9 billion in December, nearly double the shortfall of a year earlier.

Bond prices were also pressured by comments from a key Federal Reserve official.

Charles Plosser, president of the Philadelphia Federal Reserve, said late Tuesday that the Fed should raise interest rates before unemployment reaches an "acceptable" level.

Plosser also said the central bank should not deviate from its plan to stop buying mortgage-backed securities this quarter.

What analysts are saying: Bill Larkin, a portfolio manager at Cabot Money Management, said Treasurys have been trading in a range since last week's dour jobs report damped enthusiasm for more risky assets.

Government data showed Friday that employers cut 85,000 jobs in December after adding 4,000 jobs the month before. The nation's unemployment remains at 10%.

Larkin said the market is also focused on the corporate sector as the quarterly reporting period gets into full swing.

"If earnings are mixed, we'll probably stay where we are," he said. "If we get more strength in earnings, we could break out to higher yields."