NEW YORK - Treasurys traded mixed Tuesday, recovering from steeper losses after a robust auction of 10-year Treasury inflation-protected securities.

The Treasury sold $8 billion worth of the securities, known as TIPS, and there were nearly two-and-a-half as many bids received as accepted.

The auction was "very strong," noted RBS Greenwich Capital analyst Ian Lyngen.

Late last year, investors flocked to Treasurys in droves as the stock market tanked and the economy deteriorated. That surge in demand send Treasury prices soaring and yields plummeting to their lowest levels in decades.

But investors have been selling Treasurys over the past several days on worries that their economic fears might be too inflated, and that the Treasury will be flooding the market with supply in coming months to finance its bailout efforts.

Treasury prices slipped in early trading Tuesday but recovered after the afternoon auction on the belief that demand for safe assets might stay high enough to absorb the huge influx of supply.

In late trading, the two-year Treasury note was unchanged at 100 5/32, and its yield was flat at 0.78 percent from late Monday. The 10-year note rose 5/32 to 111 4/32, and its yield slipped to 2.47 percent from 2.48 percent late Monday. The 30-year Treasury bond rose 15/32 to 128 30/32, and its yield fell to 3.01 percent from 3.03 percent, according to BGCantor Market Data.

The yield on the three-month T-bill, considered one of the safest short-term investments, rose to 0.14 percent from 0.09 percent. Its discount rate was 0.14.

Meanwhile, the cost of three-month loans between banks fell further Tuesday ahead of expected interest rate reductions from the European Central Bank and the Bank of England. The London Interbank Offered Rate, or Libor, on three-month loans in dollars dipped 0.01 percentage points to around 1.41 percent, according to the British Bankers' Association.

Mortgage-backed securities continued to rise in value, driving down yields. Falling mortgage-backed securities yields should continue to pull down mortgage rates for homeowners.

Fannie Mae's mortgage-backed securities dropped 0.30 percentage points on Tuesday, after falling 0.17 percentage points on Monday, according to Miller Tabak & Co. analyst Tony Crescenzi.

The Fed sparked the rally in mortgage-backed securities late last year, when it said it would buy the securities. That rally was stoked on Monday when the Fed began the purchases.

A service of YellowBrix, Inc.