NEW YORK (MarketWatch) -- Treasurys fell Monday, pushing yields up, after the U.S. government agreed to invest $20 billion in Citigroup and guarantee about $300 billion in its troubles assets.
The rescue comes as the Treasury Department plans to sell record amounts of two-year and five-year notes in a holiday-shortened week.
Ten-year yields rose 5 basis points, or 0.05%, to 3.28%. Yields move in the opposite direction of prices.
U.S. equities headed higher on the Citigroup news.
Also on the negative side for bonds, plans from President-elect Barack Obama for a $500 billion economic stimulus package raise concerns that Treasury supply will balloon even further.
"One thing for certain: all this stimulus and tax cuts will be funded from the Treasury market," said Andrew Brenner, co-head of structured products and emerging markets at MF Global.
Bids for $36 billion in two-year notes are due at 1 p.m. Eastern. The Treasury will also sell $26 billion in five-year notes on Tuesday.
Traders also said volume may be thin this week as the Securities Industry and Financial Markets Association is recommending bond trading end early on Wednesday and Friday and close on Thursday in observance of Thanksgiving.
Still, some bond analysts worried what the rescue indicates about continuing problems in the financial sector.
"The Citi news, while soothing for stocks, still begs questions regarding what shoe could drop next," Roseanne Briggen, Treasury analyst at Informa Global Markets, wrote in an email. "Treasury traders have been defensive."
Data on existing home sales for October showed show the pace slowed 3.1% to a seasonally-adjusted annual rate of 4.98 million, worse than economists surveyed by MarketWatch had expected.
