Government bonds were little changed Monday as soaring stock prices chipped away at demand for Treasurys after a successful auction of three-year notes.

Treasury prices rose initially after the $40 billion auction, but by late afternoon were off their highs as stocks surged to their best levels of the year.

A weak dollar was driving investors to buy riskier assets like stocks and commodities, which can generate bigger returns.

The Treasury auction also benefited from the falling dollar, which gave foreign investors more buying power. Foreign bidders purchased 68.5 percent of the notes.

The bid-to-cover ratio, a measure of demand, was 3.33, up from 2.76 at a similar auction last month. It was the strongest demand garnered by an auction of three-year notes since 1993, said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners, a brokerage for institutional investors.

After the auction, the three-year note held steady at 100 1/32. Its yield fell to 1.36 percent from 1.37 percent late Friday. It stood at 1.37 percent in late trading.

The benchmark 10-year Treasury note gained 3/32 to 101 3/32, pushing its yield down to 3.49 percent from 3.50 percent.

Later this week, the government will issue $25 billion in 10-year notes and $16 billion in 30-year notes. Analysts expect those auctions to attract solid demand as well.

Stocks, commodities and bonds have all benefited from record-low interest rates this year, enabling foreign investors to borrow cheaply and get more dollar-denominated assets for their money. Continued...