Treasurys were little changed Wednesday despite a strong auction for $39 billion in five-year notes.
Bond prices held their own for the second straight day as demand for new U.S. government debt remained strong, following an auction for one- and two-year Treasurys on Tuesday.
"The market is digesting the current supply easily," said John Spinello, a bond strategist at Jefferies & Co.
The price for the five-year notes fell 2/32 to 100 24/32 while its yield rose to 2.46 percent from 2.45 percent.
The bid-to-cover ratio, a measure of demand, was 2.51 percent, much higher than the 1.92 percent ratio during last month's auction of similar notes.
Strong demand at recent auctions suggests investors have little near-term concern about inflation. However analysts say it's a problem that could eventually create trouble for the bond market.
Mark Matson, founder and CEO of Matson Money in Cincinnati, said huge government spending could eventually lead to rising interest rates. Improving consumer spending could put further pressure on prices, leading to inflation, Matson said, though he noted that the current recession means it's unlikely to occur in the near future.
Matson said investors looking for safe investments are best served putting their money in short-term bonds to avoid the potential of inflation eating into the fixed returns on government debt.
The benchmark 10-year Treasury note fell 3/32 to 101 14/32, sending its yield up to 3.45 percent from 3.44 percent late Tuesday.
In other trading, the 30-year bond rose 1/32 to 104 26/32, and its yield fell to 4.22 percent from 4.23 percent.
The price of the two-year note fell 1/32 to 99 27/32, a day after the government auctioned off $42 billion of the debt. Its yield rose to 1.07 percent from 1.06 percent.
The yield on the three-month T-bill rose to 0.16 percent from 0.15 percent.
The cost of borrowing between banks fell. The British Bankers' Association said the rate on three-month loans in dollars _ the London Interbank Offered Rate, or Libor _ dipped to 0.37 percent from 0.38 percent.