Treasurys rally as stocks slump

NEW YORK (CNNMoney.com) -- Treasury prices were mostly higher Wednesday as stocks took a hit and investors braced for upcoming auctions.

What prices are doing: The benchmark 10-year note rose 2/32 to 102-23/32, pushing the yield down to 3.18% on Wednesday from 3.19% late Tuesday. Bond prices and yields move in opposite directions.

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But the 30-year bond lost 1/32 to 104-15/32, yielding 4.11%. The 5-year note inched 1/32 higher to 100-23/32 and yielded 1.97%, while the 2-year note was up 1/32 lower to 100-1/32, yielding 0.73%.

What's moving the market: Treasurys fell for most of the day, as U.S. stock markets soared above the seven-month lows hit earlier in the week. But prices reversed direction, after stocks turned lower in the last hour of trading.

Since Treasury bonds are backed by the U.S. government, investors view them as low-risk investments that are attractive during times of economic uncertainty.

"Bonds are trading off stocks and euro strength or weakness," said Bill Larkin, a portfolio manager at Cabot Money Management.

Larkin said that the rebound in the stock markets seen earlier Wednesday had taken some panic out of the bond market, but that the afternoon reversal was a sign of "embedded nervousness."

Wednesday's jump in Treasury prices continues the trend seen over the past month. In that time, Treasury yields, which move in the opposite direction of prices, have fallen nearly 15% amid signs of economic weakness in the U.S. and uncertainty in Europe.

"When you get volatility like this, it's a sign of confusion about the uncertainty. It's unhealthy," said Larkin.

Treasurys are likely to continue trading within their current ranges, says Larkin, especially as fear about the euro's impact on corporate earnings -- due in the coming weeks -- grows.

Auction: The government is also holding debt auctions this week, selling $70 billion in notes and bonds. The $36 billion offering of 3-year notes on Tuesday was met with solid demand. Another $21 billion in 10-year notes was sold Wednesday. The government will offer $13 billion of 30-year bonds on Thursday.