Treasurys climb as traders seek safety of bonds; 3-month bill yield hits lowest level of year

Treasury prices rise as investors exit stocks

NEW YORK — Treasury prices rose Thursday as investors swapped riskier investments in stocks for the safety of government-backed debt.

Three-month bill yields dipped to their lowest level since last December, when investors poured money into what is considered a very stable investment as the credit crisis worsened. The yield on the three-month bill fell as low as 0.005 percent in afternoon trading, below the 0.02 percent yield in trading late Wednesday. Its discount rate was 0.01 percent.

Mike Wallace, global market strategist at Action Economics, said part of the rise in Treasury prices and the corresponding drop in yields could be a sign of investors moving into safer investments as the year ends.

That kind of trading pattern often occurs between Thanksgiving and the end of the year, Wallace said, but investors might be making the move a bit earlier this year because of the big rally in stocks in recent months.

The price of the benchmark 10-year Treasury note rose 7/32 to 100 8/32. That pushed its yield down to 3.34 percent from 3.37 percent late Wednesday.

A strengthening dollar and continued signs that a recovery is likely to be slow and bumpy led to a stock sell-off. The Dow Jones industrials lost about 94 points.

Energy and material stocks were hurt as commodities prices fell. A sudden rise in the value of the dollar, which tends to trade inversely to commodities, sent prices for basic materials like crude oil sharply lower. A stronger dollar makes commodities more expensive to foreign buyers.

Economic data provided further signs than an economic recovery is likely to be slow in 2010, adding to demand for safe-haven investments.

The Conference Board said its index of leading economic indicators rose 0.3 percent in October, down from a 1 percent gain in September and below the 0.5 percent forecast by economists polled by Thomson Reuters.

A separate report from the Mortgage Bankers Association provided fresh evidence that the housing market is still struggling. The group said that more than 14 percent of homeowners with a mortgage were behind in their payments at the end of September.

In other trading, the 30-year bond rose 11/32 to 101 18/32, pushing its yield down to 4.28 percent from 4.31 percent.

The two-year note rose 3/32 to 100 18/32. Its yield fell to 0.71 percent from 0.75 percent.

The cost of borrowing between banks dipped. The British Bankers’ Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — fell to 0.2666 percent from 0.2691 percent.