The Bond Trade with Jeff Kilburg of TreasuryCurve

U.S. Treasury prices retreated on Tuesday as stock market gains, led by industrial and big-cap technology shares, damped demand for safe-haven U.S. government debt.

The more subdued demand for safety appeared to carry over into the U.S. Treasury's $21 billion 10-year note auction which had the highest level of indirect bids, but the lowest level of direct ones, since June. Also, the ratio of bids offered to those accepted was the lowest since May.

"You've got kind of a turn away from the flight-to-quality bid," said Richard Gilhooly, interest rate strategist at TD Securities in New York.

That contributed to some mixed results for the Treasury auction where the bid to cover ratio for 10-year paper yielding just 2 percent was 3.03, a little weaker than the average of 3.21 for the last four 10-year note sales, said Ian Lyngen, senior government bond strategist at CRT Capital Group in Stamford, Connecticut.

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