U.S. selling 2-year notes later in session By Deborah Levine, MarketWatch NEW YORK (MarketWatch) — Treasury prices slipped Tuesday, pushing yields up slightly and giving back some of the prior session’s gain, following a report on U.S. home prices. Still to come are data on consumer confidence and the government’s sale of 2-year notes. Yields on 10-year notes 10_YEAR +0.62% , which move inversely to prices, fell as low as 1.91% before turning up 1 basis point to 1.95%. A basis point is one one-hundredth of a percentage point. On Monday, they closed at their lowest level since late February. Five-year note yields 5_YEAR +1.09% were little changed at 0.83%. The yield on 30-year notes 30_YEAR +0.32% turned up 1 basis point to 3.10%, rising from their lowest level since early March. The S&P/Case-Shiller index for February showed the 20-city composite falling 0.8% compared to January levels, taking the year-on-year drop to 3.5%. The index thus stood at its lowest level since October 2002. See more on home prices. Besides lackluster economic data, potential changes in political leadership in France and the Netherlands raised concerns about whether the euro zone will be able to push through the kinds of austerity measures and reforms seen as vital to keeping the region’s sovereign-debt crisis under control. For benchmark 10-year notes, “the new recent low yield yesterday at 1.91% was driven by escalating euro-area concerns and by new historic low yields on 10-year [German] bunds,� said Richard Gilhooly, U.S. director of interest-rate strategy at TD Securities. “Austerity fatigue and removal of incumbents is taking decision-making away from bureaucrats and entrenched politicians and is likely to exert considerable stress on euro financials and sovereign spreads over coming weeks.� Auction, Fed meeting Also Tuesday, the Treasury Department will auction $35 billion in 2-year notes 2_YEAR +1.50% at 1 p.m. Eastern time. The auction should receive “decent� demand, said bond strategists at Nomura Securities. Significant risks related to the euro-zone’s debt problem and now political concerns will keep high the appeal of U.S. bonds. However, yield levels have fallen, so the auction may see less demand from investment funds, they said. During the session, the Federal Reserve’s policy-setting committee will begin its two-day meeting to review the economy and its stance toward interest rates. In its statement and press conference on Wednesday, most analysts don’t expect any major changes to the Federal Open Market Committee’s statement or policy measures. Officials are expected to continue to forecast rates staying low until 2014 and will end the U.S. central bank’s current bond-purchase program, known as Operation Twist, in June. Read about Treasurys, Fed. However, investors will be looking for any clues as to whether Fed policy makers are leaning toward additional long-term asset purchases or not. Deborah Levine is a MarketWatch reporter, based in New York.

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