Treasurys tumble as stocks surge on housing data

NEW YORK — Treasury prices reversed early gains and tumbled Thursday after a report showing a big jump in existing home sales sapped demand for the safety of government debt.

A private real estate group said sales of previously occupied homes rose 3.6 percent in June. It was the third monthly increase in a row — a sign to investors that one of the most troubled areas of the economy is healing.

The report sparked a surge of buying on Wall Street, sending the Dow Jones industrials back above the 9,000 mark for the first time since January. The Dow added 188 points to finish at its best level since November.

Treasurys are considered a safe-haven asset, and tend to sell off when the outlook for the economy improves.

It was the second day Treasurys fell, pushing their yields higher. That can be worrisome for consumers because yields on long-term Treasurys are linked closely with interest rates on mortgages and other consumer loans.

Treasurys also came under pressure as the Treasury Department announced it would auction $115 billion in two, five, and seven-year notes next week, more than the market had been expecting. The Treasury also plans to auction off $90 billion in three and six-month and one-year bills.

Treasurys fell on Wednesday in anticipation of the Treasury Department’s announcement. Treasury auctions have been some cause for worry this year as investors feared that the huge amounts of debt the government is issuing to fund its stimulus programs could outpace demand. That could force the government to increase returns on bonds to lure buyers, which in turn could raise borrowing costs and hinder the economy’s recovery.

So far, auctions have been going fairly smoothly, but investors are still worried that at some point an auction will go badly, said Kim Rupert, managing director of global fixed income analysis at Action Economics.

“There’s not much reason to be buying Treasurys at these levels given the supply that’s coming,” she said.

In late trading, the benchmark 10-year Treasury note fell 30/32 to 95 18/32, sending its yield up to 3.67 percent from 3.55 percent late Wednesday. The 10-year yield is still well below an eight-month high of 4.01 percent hit in early June.

The 30-year bond tumbled 1 21/32 to 95 2/32, and its yield rose to 4.55 percent from 4.45 percent.

The two-year note fell 4/32 to 100 6/32, while its yield rose to 1.02 percent from 0.95 percent.

The yield on the three-month T-bill was unchanged at 0.17 percent. Its discount rate was 0.18 percent.

Treasurys jumped earlier in the week after Federal Reserve Chairman Ben Bernanke told Congress he expected that inflation would remain in check for at least the next two years. That eased fears of rising prices reducing the value of a bond’s fixed returns.