Treasuries fall as expectations for rate cuts drops

Ten year treasury notes fell 4/32 in price to yield 3.722 at 3:38 p.m. in New York. Two year notes were down 3/32 to yield 2.188 percent.

The Bank of England said announced a plan to exchange about 50 billion pounds ($100 billion) of government bonds for illiquid mortgage-backed securities. The securities have been difficult in financial and credit markets which have been battered by the U.S. housing crisis which began last summer.

Investors trading on the Chicago Board of Trade are betting on a quarter percent cut in the Federal Reserve's benchmark interest. The odds for a bigger drop have diminished greatly. Last week investors were betting 56 percent.

Treasuries fell despite weakness from a pair of significant U.S. lenders. Bank of America Corp. reported a larger than expected 77 percent drop. Regional bank National City Corp. said it would raise $7 billion after losses linked to the floundering housing market