Treasurys fell sharply Monday as another big gain in stocks encouraged investors to draw more money away from the safety of bonds. A sweetened buyout deal for BearStearns and better than expected housing data also lessened the market's appetite for government debt.
JPMorgan Chaseraised its offerfor Bear Stearns to $10 a share from $2 a share — a move aimed at assuaging Bear Stearns shareholders that now values the failing investment bank at around $1.19 billion.
Meanwhile, the National Association of Realtors said February sales of existing homes rose by 2.9 percent — the first rise after six consecutive months of declines. Analysts had been predicting another drop.
Treasurys declined as stocks surged on the news, with the Dow Jones industrial average up more than 200 points.
"My general feeling is that we might have averted some financial crisis — this liquidity-slash-credit crisis," said Tom di Galoma, head of Treasurys trading at Jefferies & Co. But he added that economic worries keep escalating, which could lead investors to move their money back into Treasurys.
"The market will eventually transition from liquidity crisis to economic crisis," di Galoma said. "The economic backdrop is still pretty weak."
The benchmark 10-year Treasury note fell 1 26/32 to 99 18/32, and yielded 3.55 percent, up from 3.34 percent late Thursday, according to BGCantor Market Data. U.S. financial markets were closed for Good Friday. Prices and yields move in opposite directions.
The 2-year note fell 14/32 to 100 10/32, with a yield of 1.83 percent, up from 1.60 percent late Thursday.
The 30-year long bond fell 2 23/32 to 101 19/32, with a yield of 4.34 percent, up from 4.17 percent.
More selling in after hours trade sent long-term yields even higher. At 5:30 p.m. Eastern time, the 10-year yield was 3.55 percent, and the 30-year yield was 4.37 percent. The 2-year yield slipped to 1.82 percent.
On Thursday, ahead of the three-day weekend, long-term Treasury prices rose on worries that a series of uneven economic reports could lead the Federal Reserve to cut interest rates further. The market is growing concerned that lower rates, while usually welcomed by bond investors, can accelerate inflation and erode the value of long-term investments.
But in addition to the revised bid for Bear Stearns and the gain in existing home sales, a weak auction of short-term Treasurys gave investors another reason to exit government securities.
The Treasury Department on Monday auctioned $24 billion in three-month bills at a discount rate of 1.200 percent, up from 1.100 percent last week, and another $22 billion in six-month bills at a discount rate of 1.550 percent, up from 1.310 percent last week.
The three-month rate was the highest since these bills averaged 1.420 percent on March 10. The six-month rate was the highest since these bills averaged 1.810 percent on March 3. The discount rates indicated the bills sold for less than face value.
After the auction, the 3-month bill yield was at 1.07 percent, up sharply from 0.35 percent Thursday, as the discount rate surged to 1.05 percent from 0.34 percent.