Treasury prices rose modestly Tuesday as investors balanced positive news from a tame inflation report against increasing supply from corporate and sovereign issues that compete against government debt.
In late trading, the yield on the benchmark 10-year Treasury note dipped to 3.33 percent from 3.34 percent late Monday. Its price rose 2/32 to 100 12/32.
The gains in Treasurys were supported by a Labor Department report showing a smaller-than-expected increase in wholesale prices in October. The government's Producer Price Index rose 0.3 percent last month, less than the 0.5 percent increase forecast by economists polled by Thomson Reuters, following a decline of 0.6 percent a month earlier.
The data reinforced assurances from Federal Reserve chairman Ben Bernanke a day earlier that inflation would not be a concern in the near future. Inflation is bad for bonds because it eats into their fixed returns over time.
Nick Kalivas, a vice president of financial research at MF Global, said optimism from the economic report was tempered by an anticipated increase in supply of corporate and foreign government bonds in the coming weeks. The added supply can reduce demand and compete with U.S. government-backed debt, dragging down prices and pushing yields higher.
Kalivas said the yield on the 10-year note is reaching a technical threshold as well that is affecting trading. If the yield on the 10-year note drifts below a range of 3.25 percent to 3.30 percent, it could trigger a wave of buying that might push the yield as low as 3 percent, he said.
The 10-year yields dipped below that level briefly in early October but quickly rose back above 3.5 percent late last month.
In other trading, the price on the 30-year bond rose 6/32 to 101 29/32, pushing its yield down to 4.26 percent from 4.28 percent.
The yield on the two-year note dropped to its lowest level since January, falling to 0.77 percent from 0.78 percent. Its price rose 1/32 to 100 14/32.
The yield on the three-month T-bill fell to 0.04 percent from 0.05 percent. Its discount rate was 0.05 percent.
The cost of borrowing between banks dipped. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ fell to 0.2703 percent from 0.2713 percent.