U.S. Treasury prices fell sharply Wednesday as fresh hopes that Europe will address its debt crisis drew money into riskier investments.
The Dow Jones industrial average jumped 286 points, its biggest gain of the year. The surge pushed the Dow back into positive territory for 2012.
As money flowed into riskier investments like stocks and commodities, traders sold ultra-safe Treasurys. The price of the 10-year Treasury note fell 50 cents for every $100 invested, pushing its yield up to 1.64 percent as of 3:30 p.m. EDT from 1.57 percent late Tuesday. Higher bond yields reflect lower demand for the securities.
Last week, the 10-year yield hit a record low of 1.44 percent after an alarmingly weak report on the U.S. job market renewed fears about the pace of economic recovery.
Wednesday's whiff of optimism was related to hopes that European officials will find new ways to ease the region's debt crisis. News reports said that German and European Union officials are assembling a rescue for Spain's teetering banks.
Spanish banks invested heavily in that nation's real estate bubble. Some can't afford the losses they expect on loans, and the Spanish government can't afford to bail them out. Spain has been the latest flashpoint of worries about Europe's financial stability.
In other trading, the price on the 30-year Treasury bond fell $1.88 per $100 invested, pushing its yield up to 2.74 percent from 2.63 percent late Tuesday.
The yield on the two-year Treasury note rose to 0.29 percent from 0.25 percent late Tuesday. The yield on the three-month Treasury bill was unchanged at 0.08 percent.