Government's 2-year auction on tap By Deborah Levine, MarketWatch NEW YORK (MarketWatch) -- Treasury prices rose on Tuesday, pushing yields down, as Greek debt continued to sell off amid heightened concern other countries will face the same problems. "The general fallout in peripheral European government bond markets is pulling Treasurys up on a safe-haven bid," said Thomas di Galoma, head of U.S. fixed-income-rates trading at Guggenheim Securities. Yields on 10-year notes (UST10Y 3.80, -0.01, -0.21%) fell 5 basis points to 3.76%. Bond yields move inversely to prices and a basis point is 0.01%. Yields on 2-year notes (UST2YR 1.05, -0.02, -1.88%) declined 5 basis points to 1.01%. Fears that Greece's woes could spread were seen putting upward pressure on Portuguese bond yields. The cost of insuring Portuguese and Spanish debt rose to record levels Monday, all weighing on the euro and supporting the dollar as investors flocked to assets perceived as less risky, including U.S. debt. Read about Greece, dollar. Treasurys stayed up after S&P/Case-Shiller's 20-city home-price index for February fell 0.9% from a month earlier, though prices rose 0.6% from a year earlier. Also on the radar the Conference Board's consumer confidence gauge for April is due at 10 a.m. Eastern time. Later in the session, the government will auction off $44 billion in 2-year notes, accepting bids until 1 p.m. The auction, and Wednesday's sale of $42 billion in 5-year notes (UST5YR 2.56, -0.03, -1.01%) , may draw weak demand because they come before the Federal Reserve's decision on interest rates Wednesday. While virtually no one expects the U.S. central bank to raise interest rtes this week, the uncertainty over what they say about their outlook for the economy could limit investor interest. Read about the Fed meeting. "Barring any new flight to quality flows -- which continues to be a real risk with the Greek situation now looking like it is morphing into some sort of contagion risk -- we think that today's 2-year auction will probably be the weakest" of the regular Treasury notes sold this week, said George Goncalves, strategist at Nomura Securities, one of the 18 primary dealers required to bid at Treasury auctions. "Folks probably won't bid aggressively for short-end paper before the Fed announcement." Ending the week, $32 billion in 7-year notes (UST7YR 3.26, -0.01, -0.43%) will be sold on Thursday. The government sold $11 billion in 5-year inflation-linked debt on Monday. Read about Monday's bond market.

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