Bond investors play the waiting game

NEW YORK (CNNMoney.com) -- Treasury prices moved slightly higher Tuesday as a lack of economic data caused investors to take a wait-and-see approach in advance of the New Year.

"It's a typically thin holiday market," said Kim Rupert, fixed income analyst at Action Economics. "We're just seeing position adjusting."

Earlier Tuesday, the Fed continued its string of government debt purchases, buying $7.8 billion of 6 to 7-year Treasuries. That purchase is expected to be followed by an additional buy of $1-2 billion in inflation protected Treasuries.

The purchases are part of the Fed's larger quantitative easing program in which the central bank plans to buy a total of $600 billion in long-term Treasuries.

While Fed purchases have given some support to Treasuries, concerns over the Eurozone debt crisis and the volatile situation on the Korean peninsula continue to be a cause of concern for investors, Rupert said.

Korean tensions had put the market on high alert Monday as Seoul conducted a planned live-fire drill. North Korea said the drill could ignite a war, but the country did not act immediately, easing investor concerns.

Geo-political events aside, the lack of market movement as the holidays approach is just about par for the course. But some encouraging retail trends might impact the market in the coming days.

"This is the best shopping season in several years," Rupert said. "And most economists have marked up their outlook for 2011."

Positive retail news could boost equities at the expenses of Treasuries, an outcome that might materialize if retailers continue to report strong sales.

What yields are doing: The yield on the benchmark 10-year note dropped to 3.31%. The 30-year bond yield declined to 4.42%.

Meanwhile, the yield on the 2-year note was unchanged at 0.61%, and the 5-year note closed lower at 1.95%.

Treasury prices and yields move in opposite directions.