Treasurys edge higher as stocks slump

NEW YORK (CNNMoney.com) -- Treasurys were mostly higher Thursday as stocks ended lower and the euro declined, boosting the appeal of safe haven bonds.

What prices are doing: The benchmark 10-year note was the one exception, falling 23/32 to 99-23/32 and yielding 3.54%. Bond prices and yields move in opposite directions.

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The 30-year bond rose 29/32 to 103-9/32, pushing the yield down to 4.43%. The 2-year note climbed 3/32 to 100-11/32 with a 0.83% yield. The 5-year note edged up to 101-6/32, yielding 2.25%.

What's moving the market: Stocks were headed for a rocky day of trading Thursday, sending investors to the safety of government-backed bonds.

Even after an upbeat employment report from the government showing that jobless claims fell for the fourth consecutive week, markets struggled on Thursday as investors worried about an investigation into Wall Street banks and euro zone debt.

A weaker euro also pushed Treasury prices up as investors continued to question the effectiveness of the financial aid package offered to the euro zone, said Kenneth Naehu, managing director and head of fixed income at Bel Air Investment Advisors.

Markets have seesawed since the announcement of the European rescue package, valued at $1 trillion, which is aimed at curbing the region's debt and stabilizing the euro.

"The cues are coming from the weaker currency and nervousness that this $1 trillion aid package is just a Band-Aid and not a solution," said Naehu. "The question is, will that Band-Aid stick until the wound is healed?"

If investors don't notice solid improvements in the euro zone in the coming weeks, Naehu said he would expect to see increased volatility in the market, resulting in higher demand for Treasurys.

Meanwhile, the Treasury Department held a $16 billion auction of 30-year notes, during which investors bid $41.56 billion.

On Wednesday, the government held a $24 billion auction of 10-year notes, bringing in bids totaling $70.9 billion.

Lending rates: Bank-to-bank lending rates for three-month loans rose on Thursday.

The London interbank offered rate, or Libor, ticked up to 0.436% after rising to 0.43% on Wednesday.

Libor is a daily average of interest rates that 16 London banks charge each other to lend money, and is used as a benchmark to calculate adjustable-rate mortgages and other loans.

Higher Libor rates indicate less lending among banks, while lower levels signal an increasing willingness to lend.

Naehu said that while Libor's recent upward trend represents a slight unwillingness to lend, its current level is still very low. To put it in perspective, Libor climbed to record highs of nearly 5% after the collapse of Lehman Bros.