Treasurys zigzag after service industry slides

NEW YORK — Treasury prices were mixed Wednesday as investors pulled some money from the stock market after its big rally.

Investors were seeking the safety of government debt as stocks retreated and after a reading on the U.S. service sector fell short of expectations.

The Institute for Supply Management’s report that its service index fell to 46.4 in July from 47 in June stirred worry that the economy will take longer to recover than some investors expected. A reading below 50 indicates the industry is contracting. It was the 10th straight monthly drop.

The reviving economic concerns raised demand for short-term Treasury debt. Long-term debt, however, slipped. The price of the 10-year note, which is used to determine rates on mortgages and other kinds of loans, fell 5/32 to 95 7/32 and its yield rose to 3.71 percent from 3.69 percent late Tuesday.

Meanwhile, the Dow Jones industrial average fell 50 points in afternoon trading as part of a broader drop in stocks.

Treasury prices found some support after the Federal Reserve said it purchased $7.25 billion in securities maturing between 2013 and 2016. The central bank has been buying government debt to help absorb supply. Washington has been issuing debt in part to pay for its efforts to reinvigorate the economy and stabilize the banking system.

The Fed hopes buying Treasurys and other debt will hold down borrowing costs and help the economy recover. Investors have worried that the record issuance could dampen demand from investors.

The borrowing will continue. The Treasury Department said Wednesday it will generate a record $75 billion in a series of auctions next week. That tops the record $71 billion set in the prior three-month period.

The government estimates it will issue debt totaling $406 billion for the July-September quarter. That’s below the record $530 billion from the same time in 2008.

In other trading, the 30-year bond fell 30/32 to 95 15/32, and its yield rose to 4.53 percent from 4.47 percent.

The two-year note rose 2/32 to 99 20/32, while its yield fell to 1.19 percent from 1.22 percent.

The yield on the three-month T-bill rose to 0.18 percent from 0.17 percent.

The cost of borrowing between banks was close to unchanged. The British Bankers’ Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — remained at 0.47 percent.