Treasury debt prices slipped Wednesday as a robust stock market rally tempered government debt's safe-haven appeal, reversing bonds' earlier gains on weak housing numbers and relatively modest inflation data.
Investors' shift into stocks and other riskier assets diminished some of the flight-to-quality trade that has stoked strong demand for Treasurys since the credit crisis erupted last August. But concern about short-term lending market stress helped curb Treasuries' losses, some said.
Major U.S. stock indices were up more than 1.5 percent in early-afternoon trade.
The benchmark 10-year Treasury note's price, which moves inversely to its yield, fell 4/32 for a yield of 3.62 percent, up from 3.61 percent late Tuesday.
"This leg up in equities above 1,350 for the S&P 500 has put some more pressure onto the Treasury market," said Carl Lantz, U.S. interest rate strategist at Credit Suisse in New York.
A move above that level puts the S&P 500 into the top half of the range it has held for about the last three months.
Earlier, data showed March housing starts fell more sharply than expected, re-igniting fears that the real estate market has further to fall before hitting bottom and sending investors into the safety of government bonds.
At the same time, data on core consumer prices -- which exclude volatile food and energy prices -- helped soothe concerns about the potential for surging commodity costs to stoke broader inflation, which erodes the value of bonds over time.
"Nominal Treasurys have had a little bit of a turnaround from a sell-off to a bit of a rally here because this is a relatively subdued report on the core side," said Mike Pond, Treasury and inflation-linked strategist with Barclays Capital in New York.