Treasurys fell for a second day Thursday as an auction of 30-year bonds brought out fewer buyers.
The disappointing auction followed another weak sale on Wednesday.
Tom Porcelli, a market economist at RBC Capital Markets, said investors stayed away from Treasurys ahead of the auction because a sale of 10-year notes the day before went poorly. Traders were afraid another bad auction would lead to more losses, he said.
"Market participants didn't show up," for the 30-year auction, Porcelli said. The bid-to-cover ratio, a measure of demand, was 2.45 in the latest auction, below the average of 2.53 during the four previous auctions for notes with a similar maturity.
Treasurys had been rallying in recent months, benefiting from strong demand at government auctions for new debt. However the recent sales indicate that appetite for safe haven investments like Treasurys could be waning as the economy recovers.
The government sold $13 billion in 30-year bonds in its latest auction. The highest yield accepted was 4.52 percent, compared with a yield of 4.48 percent on outstanding 30-year bonds that were trading just before the auction was completed. That gap shows that investors underestimated how weak demand would be at the auction.
The price of the 30-year bond fell 1 15/32 to 97 26/32 in late trading, pushing its yield up to 4.51 percent from 4.42 percent late Wednesday.
The price of the 10-year note, which is often used as a guide for interest rates on consumer loans, continued to slide after Wednesday's auction. The price of the note fell 17/32 to 98 30/32, sending its yield up to 3.50 percent from 3.44 percent.
The slide came as demand for stocks rose following a narrowing of the nation's trade gap in part because of rising exports. The Dow Jones industrial average rose 69 points.
In other trading, the price of the two-year note fell 1/32 to 99 30/32, while its yield rose to 0.78 percent from 0.76 percent.
The yield on the three-month T-bill was flat at 0.01 percent, while its discount rate was 0.03 percent.
The cost of borrowing between banks fell. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ fell to 0.2543 percent from 0.2552 percent.