Two-Year Treasury Yield Declines to Record Low 0.6% on Demand for Safety

Bloomberg:

Treasuries advanced, pushing two- year yields to a record low and that on the 10-year security below 3 percent for the first time since April 2009, as a decline in stocks boosted demand for the safest assets.

Government securities headed for their best quarter since the 2008 financial crisis as European governments’ struggles to rein in debt increased demand for the relative safety of U.S. securities. Pacific Investment Management Co., which runs the world’s biggest bond fund, said in a report on its website that inflation will stay low for the rest of 2010.

“There’s risk aversion, and nervousness about the euro- land debt crisis isn’t going away,” said Jesper Fischer- Nielsen, a senior fixed-income strategist in Copenhagen at Danske Bank A/S. Investors have also pushed “any speculation about the Federal Reserve tightening back to a more distant future,” supporting demand for government debt, he said.

The yield on the two-year note fell two basis points to 0.61 percent as of 7:39 a.m. in London, according to data compiled by Bloomberg. The 0.625 percent security due June 2012 rose 1/32, or 31 cents per $1,000 face amount, to 100 1/32.

The yield dropped as low as 0.5935 percent. The prior record was 0.6044 percent set Dec. 17, 2008, after the Fed cut its target for overnight bank lending to a range of zero to 0.25 percent. It has held the rate there since.

Ten-year yields dropped four basis points to 2.99 percent, after touching 2.97 percent, the least since April 29, 2009.

Posted via email from Jim Nichols