Treasury prices rose Tuesday after solid results from an auction of five-year notes shored up the market's confidence that demand for U.S. government debt would remain strong.
The bid-to-cover ratio, a measure of demand, was 2.81 _ the highest level seen at any auction for five-year notes since 2007. The ratio was 2.63 last month for an auction of notes with a similar maturity.
"Everything about this auction was positive," said Richard Bryant, senior vice president of U.S. Treasury trading at MF Global.
In late trading, the price of five-year notes rose 11/32 to 101 9/32, pushing its yield down to 2.10 percent from 2.18 percent late Monday.
Bryant said the results from auctions of shorter-term government debt remain strong because of the amount of cash looking to be invested in safe investments. Government debt with maturities of a few months or years have been in high demand recently because there is little concern about near-term inflation.
Investors who have locked in gains from the stock market's eight-month rally are now also looking for places to invest cash through the end of the year, which has further boosted demand, Bryant added.
Tuesday's results followed strong results at auctions Monday for two-year notes and three-month and six-month bills. The government is set to auction off $32 billion in seven-year notes on Wednesday as it wraps up sales for the week ahead of the Thanksgiving holiday.
Bryant said all indications point to another strong showing on Wednesday.
In other trading, the price on the 10-year note, which is often used as a benchmark for consumer loans, rose 11/32 to 100 17/32. Its yield fell to 3.31 percent from 3.36 percent.
The price of the 30-year bond rose 12/32 to 102, sending its yield down to 4.26 percent from 4.28 percent.
The yield for three-month T-bills was unchanged at 0.03 percent. Its discount rate was 0.04 percent. The yield on the three-month T-bill briefly turned negative last week as investors looked for a safe place to invest short-term cash as the end of the year approaches.
The cost of borrowing between banks declined. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ fell to 0.2606 percent from 0.2622 percent.