Treasury prices finished higher Tuesday as reviving jitters about the financial sector encouraged investors to keep their money in safe government securities.After rising modestly earlier in the day, the Dow Jones industrial average was down about 80 points on anxiety about Lehman Brothers Holdings Inc. and the broader financial sector. Media reports Tuesday said the investment bank is looking to raise cash. "We're trading places with stocks today. As they get weaker, the allocation comes back into bonds," said Kevin Giddis, managing director of fixed income at Morgan Keegan.

Furthermore, investors are cautiously awaiting Friday's Labor Department report on job creation during May, which is expected to show another monthly drop.



The benchmark 10-year note rose 15/32 to 99 24/32 and yielded 3.91 percent, down from 3.97 percent late Monday.

The 30-year long bond rose 26/32 to 95 31/32 and yielded 4.63 percent, down from 4.68 percent late Monday.

The 2-year note rose 4/32 to 100 12/32 and yielded 2.43 percent, down from 2.51 percent.

In late trading, the yield on the 10-year fell to 3.89 percent; the 30-year fell to 4.62 percent; and the 2-year dropped to 2.40 percent.

The 3-month Treasury bill's yield fell to 1.91 percent from 1.94 percent on Friday, and the discount rate rose to 1.88 percent from 1.85 percent.

Treasury prices had also advanced on Monday, after data on manufacturing and construction spending suggested that parts of the economy are still on the decline.

Earlier Tuesday, a warning about inflation from Federal Reserve Chairman Ben Bernanke led some bond investors to unwind their Treasury holdings. Bernanke suggested in a speech presented via satellite in Barcelona, Spain, that the Fed is unlikely to make additional interest rate cuts because of the rising risk of inflation brought on by surging energy prices. He also predicted the central bank's rate reductions and tax rebates will bring "somewhat better economic conditions" later in the year.

To some market participants, his tone suggested that the Fed is leaning more toward an eventual rate hike than a rate cut. Rate hikes mean returns on Treasurys become less attractive when compared to other assets.

But economic data has been coming in fairly weak in recent weeks, making a rate hike seem unlikely in the near term.

In economic data Tuesday, the Commerce Department reported that factory orders rose by a much higher-than-expected 1.1 percent in April. But the bulk of the gain was in orders for non-durable goods, particularly those from oil refineries. Orders for durable consumer goods were down for the month, suggesting that consumer spending remains hampered.

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