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10-year Treasury retreats from 4% yield

By Annalyn Censky, staff reporter

NEW YORK (CNNMoney.com) -- Treasury prices rose Tuesday, pushing the 10-year yield down from the 4% highpoint it reached for the first time in 18 months. The government is auctioning off $82 billion in U.S. debt this week and so far, investors have responded with solid demand.

What prices are doing: The benchmark 10-year note rose 3/32 to 97-3/32, and its yield dipped to 3.96%, from 4% the day before. Investors have been looking forward to the yield reaching the 4% mark ever since it dropped from that level in October 2008, the height of the financial crisis.

Click the chart for the latest prices and yields.

Bond prices and yields have a converse relationship; when prices rise, yields fall.

In morning trading Tuesday, the 30-year bond rose 1/32 to 96-7/32, and its yield fell to 4.84%. The 2-year note rose was flat at 99-8/32 and yielded 1.14%. The 5-year note rose 23/32 to 99 and yielded 2.71%.

What's moving the market: Tuesday marked the first normal trading day after a long holiday weekend. Bonds traded in a shortened session Friday for the Good Friday holiday, and markets in Europe and Hong Kong were closed for Easter Monday.

Light trading volume from the holidays and a slew of upbeat economic reports on both Friday and Monday made it easier for bullish bond investors to push the 10-year yield up to the 4% mark. Broader trading participation on Tuesday and renewed concerns about Greece's financial aid package brought the 10-year's yield back down.

In its second auction of the week, the Treasury Department issued $40 billion in 3-year notes Tuesday. Investors submitted bids totaling nearly $124 billion. The bid-to-cover ratio was 3.1, meaning the auction showed solid demand. A sale of $8 billion in 10-year Treasury Inflation-Protected Securities, or TIPS, on Monday was also well-received.

The auctions this week also include $21 billion in reopened 10-year notes on Wednesday and $13 billion in existing 30-year bonds Thursday. Treasury prices typically fall the day before major auctions, in anticipation of the new supply issue.

What analysts are saying: As yields rose on upbeat economic news in the last few trading days, the better rates have lured in more investors.

As a result, Tuesday was a high volume day for Treasurys, said Ron Mark, a fixed-income trader with BMO Capital Markets. But analysts are still looking ahead to the 10-year and 30-year auctions before they'll be prepared to define any movement in the markets as a significant trend, he said.

If investors continue to believe an economic recovery is underway, then analysts expect Treasury prices will continue to decline. To top of page

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