Published: Tuesday, 28 Jul 2009 | 2:58 PM ET

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Shorter-dated U.S. Treasury debt eased Tuesday after mixed results in an auction of $42 billion of two-year notes had some analysts wondering if the global appetite for U.S. government debt might be waning.

Longer-dated U.S. Treasury debt prices rose however as stocks showed some weakness, taking back a little of their recent gains and bolstering the safe-haven appeal of government debt.

"There is an allocation out of stocks and into bonds after the great run that stocks have had," said William O'Donnell, head of U.S. Treasury strategy at RBS Securities in Greenwich, Conn., adding however that the two-year note auction "was a much uglier mess than we would have expected."

Two-year Treasury notes were trading 3/32 lower in price for a yield of 1.10 percent, up from 1.04 percent late Monday, while the 30-year bond was 22/32 higher in price for a yield of 4.58 percent from 4.63 percent late Monday.

Benchmark 10-year Treasury notes were trading 5/32 higher in price for a yield of 3.71 percent from 3.72 percent late Monday.

"People are rebalancing a little bit in favor of Treasurys," said David Dietze, chief investment strategist with Point View Financial Services in New Jersey, adding "Treasuries are looking over their shoulders at stocks, which have had a spectacular two-week run."

Treasurys reined in much of their gains, and shorter-dated notes turned negative immediately after the two-year note auction Tuesday afternoon, which was by some measures less than a success.

"People wanted the two-year notes at yesterday's levels and not today's," RBS's O'Donnell said.

Many analysts had expected relatively solid demand in the sale, as the security's shorter maturity makes it less susceptible to economic uncertainty while still offering a higher rate than even shorter-dated Treasury bills.

The Treasury will auction $39 billion of five-year notes Wednesday, and $28 billion of seven-year notes Thursday. It sold $6 billion of 20-year inflation-protected securities Monday, bringing this week's total coupon sales to a record-large $115 billion.

Impact of Data Mixed

Treasury prices found some early support Tuesday from data showing U.S. consumer confidence fell by more than expected in July, with sentiment hobbled by a difficult job market.

Bond Yields

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"With the consumer being two-thirds of the economy, if they are in a bad mood that certainly bodes poorly for consumer spending," Point View's Dietze said, adding "that sends negative vibrations for the outlook for the economy and Treasuries are the key safe haven."

Treasurys found some early support But, data from Standard & Poor's/Case Shiller showing home prices in 20 metropolitan areas rose by 0.5 percent in May after falling 0.6 percent in April had little effect on the market. Investors had been looking for May home prices to decline by 0.5 percent.

For some analysts, the home prices were more evidence that the U.S. housing sector may be pulling out of its sharp decline, adding to data Monday showing higher-than-expected new-home sales in June.

"It's largely consistent with the bottoming process in the housing sector," Tom Porcelli, senior economist at RBC Capital Markets in New York, said of the home price index.

Five-year notes were trading 3/32 lower in price for a yield of 2.61 percent from 2.59 percent late Monday.

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