By Deborah Levine, MarketWatch
NEW YORK (MarketWatch) -- Treasury prices slipped modestly on Tuesday, pushing long-term yields up, before the government's sale of 10-year notes, the second of three big sales this week.
Also pressuring bonds, the Commerce Department said the trade deficit unexpectedly widened in May.
Yields on 10-year notes (UST10Y 3.08, +0.01, +0.29%) , which move inversely to prices, rose 1 basis point to 3.08%. A basis point is 0.01%.
Yields on 2-year notes (UST2YR 0.65, 0.00, 0.00%) were little changed at 0.65%.
Treasury prices gave up small gains after a report showed the U.S. trade deficit widened to $42.3 billion in May. Economists surveyed by MarketWatch expected the trade deficit to shrink to $38.8 billion from $40.3 billion in April. See more on trade balance.
The Treasury Department will accept bids on $21 billion in 10-year notes until 1 p.m. Eastern time.
The government will finish the week's auctions with $13 billion in 30-year bonds (UST30Y 4.07, +0.01, +0.20%) on Wednesday. See Treasury's auction calendar.
Both long-term debt sales are reopenings, meaning the securities being sold will mature on the same date and carry the same coupon as quarterly-issued securities -- in this case, debt sold in May. Both amounts are the same as at the previous reopening last month.
On Monday, the government received lackluster demand at its auction of new 3-year notes (UST3YR 1.07, +0.03, +3.29%) . Traders attributed the results to the historically low yield and the lack of time to set up for the sale, since the government rarely starts note sales on Monday. Read more about 3-year bond auction.
Traders are also watching improvement in stocks, which tends to reduce investor interest in the relative safety of U.S. government debt. U.S. stock futures pointed to a higher opening as Alcoa Inc. (AA 11.27, +0.40, +3.68%) , the first Dow component to give second-quarter results, reported strong revenue growth.
"Auction demand this week could be lackluster due to equity markets firming generally ahead of what could be a better than expected earnings season," said Tom di Galoma, head of U.S. rates trading at Guggenheim Partners. "We are still expecting a trade back towards 3.13% on 10-year notes as supply considerations take hold."
