Treasury prices extend losses in flight to stocks

NEW YORK (AP) _ Treasury prices fell for a second straight session on Wednesday as investors, awaiting a sale of two-year notes, grew increasingly optimistic about the ability of banks and brokerages to weather the credit crisis.

The government plans to sell $31 billion of two-year notes during the afternoon. In addition, the Treasury Department will issue about $21 billion of five-year notes on Thursday.

The auctions increase the amount of debt, and the increase in supply tends to send prices lower.

In addition, investors moved out of the relative safety of government debt and placed more bets on equities. The stock market has risen for the past two sessions due to lower oil prices and relief that financial companies don't need to raise new capital to offset losses. Shares of banks and brokerages continued their ascent on Wednesday.

In midday trading, the 10-year Treasury note fell 10/32 to 97 26/32. Its yield rose to 4.15 percent from 4.10 percent on Tuesday, according to BGCantor Market Data. Yields move in the opposite direction as prices.

The 30-year long bond — typically the most sensitive to inflation worries — fell 19/32 to 94 29/32. Its yield rose to 4.70 percent from 4.66 percent Tuesday.

The 2-year note fell 1/32 to 100 6/32, and yielded 2.78 percent, up from 2.73 percent. Short-term debt is more sensitive to changes in interest rates.

"We continue to trade counter to stocks; when the stock market rallies then Treasurys sell off," said Jay Mueller, an economist at Strong Capital Management. "We've seen stocks rise because some of the earnings haven't been as bad as feared, and we've seen oil come way down."

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