Financial Watch

Interest rates rose in the bond market Wednesday after a range of reports signaled that the economy is recovering.

Prices on most Treasurys fell, driving yields higher.

Demand for safety holdings like Treasurys fell after Federal Reserve Chairman Ben Bernanke said the economy is recovering. Economic reports and improved quarterly earnings at chipmaker Intel Corp. and the big bank JPMorgan Chase & Co. bolstered the sense that business conditions are getting better.

The yield on the benchmark 10-year Treasury note maturing in February 2020 rose after a three-day slide. The yield advanced to 3.87 percent in late trading from 3.82 percent Tuesday. Its price fell 11/32 to 98 1/32. The 10-year yield is linked to rates on mortgages and other consumer loans.

Last week, the 10-year yield touched 4 percent after government auctions of $82 billion in debt added to supply. Increased predictions that the economy is climbing back also hurt demand.

Bernanke said in testimony before Congress’ Joint Economic Committee that the rebound is likely to last but that there won’t be a quick fix for unemployment. He predicted a “moderate” economic recovery.

The nation’s unemployment rate has been flat at 9.7 percent for the past three months. It reached 10.1 percent in October.

Bernanke also said Washington needs to rein in spending to reduce budget deficits, which threaten to send interest rates higher. He said forming a solid plan to trim deficits would help lower longer-term rates.

Bernanke reaffirmed that the Fed plans to hold interest rates at record low levels for an “extended period.” Some traders had predicted Bernanke would back away from the language because the economy appears to be gaining steam.

Economic reports also sent investors looking for riskier assets like stocks. The Dow Jones industrial average rose 104 points to continue its move above 11,000 this week and the Standard & Poor’s 500 index topped the 1,200 mark for the first time in a year and a half.

The Commerce Department said that retail sales rose 1.6 percent in March. That was the third straight monthly gain and was well ahead of the average 1.2 percent increase that economists had forecast, according to Thomson Reuters.

The Labor Department said its Consumer Price Index rose 0.1 percent in March. The increase met forecasts and indicated that inflation remains in check.

A report from the Fed about business conditions in its 12 regions also signaled that price increases are subdued.

Traders welcomed the news on inflation because rising prices can erode returns of fixed-income investments.

Michael Materasso, senior vice president and co-chair of the fixed income policy committee at Franklin Templeton Fixed Income Group, said the inflation reports kept some investors from dumping Treasurys in favor of riskier assets.

“Even with much better economic activity, inflation is not going anywhere,” he said.

In other trading, the yield on 30-year bond that matures in February 2040 rose to 4.73 percent from 4.69 percent. Its price fell 24/32 to 98 9/32.

The yield on the two-year note that matures in March 2012 was flat at 1.06 percent. Its price was unchanged at 99 28/32.

The yield on the three-month T-bill that matures July 15 remained at 0.15 percent. Its discount rate was 0.16 percent.