Treasury Notes Rise as Market Stumbles
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Treasury notes rose to the highest level since 2005 on speculations that credit losses will deepen.
Two-year debt led the rally as the slumping housing market encouraged traders to increase bets that the Federal Reserve will reduce borrowing costs a third time this year. Investors purchased Treasuries as New York-based William Tanona of Goldman lowered the equity rating of Citigroup, the largest American bank by assets, after rising mortgage delinquencies cut into earnings.
“Short-term rates are falling without help from the Fed,” a Treasury trader in New York at Mizuho Securities USA Inc., one of the 21 primary dealers that participate in government auctions, Mark Sauvigne, said. “The Fed seems to be following, not leading.”
The yield on two-year notes fell 18 basis points, or 0.18 percentage point, to 3.17% at 4:16 p.m. in New York, according to bond broker Cantor Fitzgerald LP. It touched 3.12%, the lowest since January 2005. The price of the 3 5/8% securities due in October 2009 rose 11/32, or $3.44 per $1,000 face amount, to 100 27/32.
Benchmark 10-year note yields decreased 9 basis points to 4.08% after touching 4.04%, the lowest since September 2005. They yielded 92 basis points more than two-year notes, the widest difference since January 2005. Yields move inversely to bond prices.
