Rates on Treasury notes fall to new low

By Associated Press
Posted Aug. 24, 2010 at 12:52 p.m.

Interest rates fell again in the Treasury market, sending the yield on the two-year note to another record low, after a sharp drop in sales of existing homes added to worries about the economy.

The yield on the 10-year note continued to hover near levels not seen since March 2009.
The yield on the two-year note fell as low as 0.46 percent early in the day Tuesday before climbing back to 0.48 percent. The rate on the note inched higher after an auction for $37 billion in two-year Treasurys. The highest yield accepted by the government at the auction was 0.498 percent, so two-year notes already  trading moved closer to that.

The price of the two-year note that matures in July 2012 rose 3.125 cents, to $100.269. Bond yields move down when their prices rise.

The National Association of Realtors said sales of previously occupied homes plunged 27 percent in July, to an annual rate of 3.83 million. That’s much lower than the 4.7 million estimate from Thomson Reuters and the lowest rate in 15 years.

Investors spooked about the potential of the economy falling back into recession have been pouring money into Treasurys. That has steadily driven prices higher and yields lower.

The yield on the 10-year note, which helps set interest rates on mortgages and other consumer loans, fell to 2.52 percent in afternoon trading from 2.60 percent late Monday. It fell as low as 2.47 percent Tuesday morning.

The price of the 10-year note that matures in August 2020 rose 75 cents to $100.906.

The 10-year note yield is the lowest it’s been since March 2009, when stocks hit their lowest level in 12 years.

In other trading, the yield on the 30-year bond that matures in August 2040 fell to 3.60 percent from 3.66 percent, while its price rose $1.3125, to $105.094.

The yield on the three-month Treasury bill rose to 0.16 percent from 0.15 percent.

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