Tags: US | Credit | Markets

Rates Fall Day After Bond Yields Hit 2010 Highs

Tuesday, 06 Apr 2010 12:05 PM

Interest rates fell Tuesday in the bond market, a day after yields reached their highest levels since October 2008.

The yield on the 10-year Treasury note fell to 3.95 percent in morning trading, after briefly climbing above 4 percent for the first time since June. The yield is now nearly as high as it was just before the credit crisis erupted late in 2008.

The price of the 10-year note maturing in February 2020 rose 9/32 to 97 10/32. The 10-year note yield is often used as a benchmark for interest rates on consumer loans.

The drop in yields and rise in Treasury prices comes as investors prepare for an auction of three-year notes later Tuesday. The yield on the three-year note fell to 1.72 percent from 1.75 late Monday. Its price rose 3/32 to 99.

Investors usually sell off Treasurys ahead of an auction in hopes of pushing the yield higher. That helps investors get better returns on the new notes being sold. However, with the recent jump in yields, investors found enough value in the bond market to buy up Treasurys ahead of a new auction.

Weak demand at recent auctions has been one of the primary reasons interest rates have climbed and bond prices have fallen in recent weeks. Mounting evidence that the economy is steadily recovering has also driven interest rates higher.

Investors are concerned about the record amount of debt the government has been issuing to help stimulate the economy leading to oversupply of bonds. A stronger economy can also lead to inflation, which would require the Fed to raise borrowing costs.

In other trading, the yield on the two-year note that matures in March 2012 fell to 1.16 percent from 1.18 percent. Its price rose 1/32 to 99 22/32.

The yield on 30-year bond that matures in February 2040 fell to 4.83 percent from 4.84 percent. The price rose 4/32 to 96 25/32.

The yield on the three-month T-bill that matures July 1 rose to 0.17 percent from 0.16 percent.

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Interest rates fell Tuesday in the bond market, a day after yields reached their highest levels since October 2008.The yield on the 10-year Treasury note fell to 3.95 percent in morning trading, after briefly climbing above 4 percent for the first time since June. The yield...
US,Credit,Markets
336
2010-05-06
 

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