Government bond prices fell Tuesday as growing expectations that Greece may avoid a debt default sap demand for the relative safety of U.S. Treasurys.
Greek lawmakers are debating a budget-cutting package that must be passed before it can receive the next installment of emergency loans from international lenders. French banks have agreed to accept slower repayment on Greek debts, another key step in avoiding a Greek default.
At a Treasury auction Tuesday afternoon, investors placed bids for 2.6 times the $35 billion in five-year notes up for sale. That's the weakest show of demand for an auction of five-year notes since June 2010.
In late afternoon trading, the price of the 10-year note fell 81.2 cents. Its yield rose to 3.03 percent from 2.93 percent late Monday. The yield on the two-year note rose to 0.48 percent from 0.40 percent.
Fears that Greece's troubles could spread throughout Europe had sent traders into Treasurys over recent months, pushing yields to their lowest levels of the year. The five-year notes auctioned Tuesday pay a yield of 1.61 percent, lower than the average over the past year.
In other trading, the 30-year Treasury bond dropped 46.8 cents. Its yield rose to 4.32 percent, up from 4.30 percent late Monday.
The yield on the three-month T-bill was unchanged at 0.01 percent. Its discount was 0.03 percent.