Bonds retreat ahead of auctions

Treasurys fall as the government prepares to offer a record $112 billion in U.S. debt next week and stocks continue to push higher.

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By Ben Rooney, CNNMoney.com staff reporter

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NEW YORK (CNNMoney.com) -- Treasurys fell Friday as the government prepared to sell a record $112 billion worth of U.S. debt next week and stocks continued to rally.

The government will auction $43 billion worth of 2-year notes, $40 billion worth of 5-year notes and $29 billion in 7-year notes next week. The U.S. will offer $85 billion in bills next week.

With little economic news on Friday, investors are taking their cues from the stock market, according to Kevin Giddis, managing director of fixed income at Morgan Keegan.

Treasurys were on track to end the week lower, "as investors pull back some gains from a pretty good week and yield to an equity market determined to trade higher," Giddis said in a research report.

Given the major influx of new issues scheduled for next week, "the 'players' appear to be content with the current price action," he added.

Stocks, meanwhile, touched new one-year highs Friday afternoon as investors weighed economic optimism against jitters about the pace of the rally amid a big quarterly options expiration.

Investors are also preparing for a two-day meeting of the Federal Reserve that begins Wednesday. Economists widely believe the central bank will keep interest rates between 0% and 0.25%.

The Fed is not expected to say anything about its plans to wind down more than a trillion dollars in lending and bailout programs, and it will likely offer a cautiously optimistic economic outlook, analysts say.

Bond prices: The benchmark 10-year note was down 20/32 to 101 8/32 and its yield rose to 3.47%. Bond prices and yields move in opposite directions.

The 30-year bond sank 27/32 to 104-24/32 and its yield was 4.21%

The 2-year note fell 4/32 99-31/32, with a yield of 1%.

The yield on the 3-month bill was 0.09%.  To top of page

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