Debt prices creep higher

Bond prices edged higher Tuesday as the market focused on the severity of the recession that has President Obama pushing hard for his stimulus plan to be passed.

Bond prices have been seesawing in recent sessions as recessionary fears compete with the record volume of debt being sold to finance the government's rescue package.

Late Monday, Obama used his first ever prime-time televised news conference as president to garner support for the financial rescue package and emphasize its urgency. Given the weakened private sector, "the federal government is the only entity left with the resources to jolt our economy back to life," he said.

Meanwhile, Treasury Secretary Tim Geithner is set to unveil the new financial sector stabilization plan Tuesday. He is expected to offer plans to shore up losses in the banking system and to support homeowners struggling with foreclosure.

And as both Obama and Geithner look to spend cash on an economic recovery, the Treasury market is set to start its first day of quarterly refunding auctions. Last week, the Treasury announced a record-sized $67 billion refunding plan, adding longer-term maturity bonds to the auction schedule in an effort to pay for the government's stimulus spending.

Tuesday, $32 billion of 3-year notes are set to be auctioned. On Wednesday, the government will auction $21 billion of the 10-year note and $14 billion worth of 30-year bonds will be sold Thursday. Meanwhile, the government is also set to auction $84 billion of shorter-term notes this week as well.

Debt prices: The 10-year benchmark bond was up 10/32 to 106-24/32 and its yield dipped to 2.95%. Bond prices and yields move in opposite directions.

The 30-year bond rallied 14/32 to 115-23/32 and its yield fell to 3.63%. Meanwhile, the 2-year note ticked up 1/32 from 99-24/32 and its yield dipped to 1.01%.

The yield on the 3-month note rose to 0.33%. Demand for the shorter-term note has been seen as a gauge for investor confidence.

Lending rates: Bank-to-bank lending rates were largely unchanged. The 3-month Libor rate ticked lower to 1.22% from 1.23% Monday, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, dipped to 0.30% from 0.31% Monday.

Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London and is used to calculate adjustable rate mortgages among other consumer loans. More than $350 billion in assets are tied to Libor.

Two credit market gauges showed increased confidence in the marketplace. The "TED" spread narrowed to 0.89 percentage point from 0.94 percentage point the day before. The smaller the TED spread, the more willing investors are to take risks.

Another market indicator, the Libor-OIS spread, dipped to 0.95 percentage point from 0.96 percentage point the day earlier. The narrower the spread, the more cash is available for lending.