NEW YORK (AP) -- President Barack Obama's tax-cut proposal spurred a widespread sell-off in Treasurys on Tuesday as traders expected the plan to create deeper budget deficits.
Yields on Treasurys shot higher as their prices fell. The 10-year yield jumped to 3.13 percent from 2.93 percent, its highest level since June 22. The yield traded as high as 3.17 percent in the late afternoon.
In a compromise with Republicans, Obama agreed to extend Bush-era tax cuts for two years. The plan would also extend unemployment benefits and cut payroll taxes for a year. Estimates vary widely, but some put the cost in the range of $900 billion over the next two years.
Appetite was weak for the Treasury's midday auction of $32 billion in three-year notes. Investors bid for 2.9 times the amount offered, the lowest demand for the notes since February. The notes sold at the highest rate in five months.
The Treasury is scheduled to sell $21 billion in 10-year notes Wednesday.
By the end of the trading day, the price of the 10-year note lost $1.75. The 30-year bond dropped $2.22. That pushed the yield to 4.37 percent from 4.24 percent. The yield on the two-year note rose to 0.53 percent from 0.43 percent.
In the Treasury bill market, the three-month T-bill paid a 0.12 percent yield. Its discount was 0.13 percent.
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