NEW YORK (MarketWatch) -- Treasury prices moved modestly higher Wednesday, pushing down on yields, as Greece's borrowing costs jumped and as concerns heightened that an anticipated rescue package for the debt-ridden country may not prove enough.
Bond traders also eyed equity movements, while U.S. stock futures pointed to a lower opening.
Yields on 10-year notes (UST10Y 3.80, 0.00, -0.05%) fell 2 basis points in early trading to stand at 3.79%.
Bond prices move inversely to their yields. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 1.00, +0.03, +2.87%) were little changed at 1.02%, as traders prepare for the government's sale of more of the securities next week.
The gap between Greek debt yields and benchmark German bond yields widened again, nearing five percentage points, as the country begins talks with European Union and International Monetary Fund officials that are widely expected to result in Athens tapping a joint rescue package. Read more about Greece and the status of talks on a financial backstop.
"The equity market has moved lower in Europe this morning given the collapse of sovereign Greek and Portuguese markets," said John Spinello, Treasury strategist at Jefferies & Co. That's "providing a bid in the Treasury market with modest flight to quality."
On Thursday, the Treasury Department will say how much in 2-year, 5-year (UST5YR 2.54, +0.02, +0.79%) and 7-year (UST7YR 3.24, +0.01, +0.28%) notes it will auction next week, weighing on those securities.
"The intermediates and front end may continue to come under pressure, especially because of next week's supply," said George Goncalves, strategist at Nomura Securities, one of the 18 primary dealers required to bid at Treasury auctions.
The government's expected to start the week with a sale of $10 billion in 5-year inflation-indexed securities, according to Wrightson ICAP. It will then auction $44 billion in 2-year debt on Tuesday and $42 billion in 5-year debt the following day, according to this forecast.
That, in turn, would be followed by $32 billion in 7-year notes on Thursday. The note amounts would be the same as last month's sale.
Five-year Treasury Inflation Protected Securities, or TIPS, are sold once a year with a reopening six months later. The last new sale of 5-year TIPS, in April 2009, was for $8 billion.
So the new one is larger, but Wrightson ICAP said it expects the government to soon say it will reduce auction sizes in later months.
