Interest rates fall as GDP data leaves concerns on economy’s ability to sustain growth

Treasurys rise as economic growth questioned

CHARLOTTE, N.C. — Interest rates fell in the bond market Friday as investors questioned whether the U.S. economy will continue to grow at the fast pace it clocked in the fourth quarter.

Gross domestic product expanded 5.7 percent in the last quarter of 2009, the government reported, the fastest pace in six years.

Despite the positive headline number, U.S. stock indexes ended the day down and bond prices rose. Many economists expect growth to slow this year as companies finish restocking inventories and as government stimulus efforts fade.

A consensus that the Federal Reserve isn’t concerned about inflation has also increased demand for Treasurys. On Wednesday, the Fed left short-term interest rates at their record lows.

The yield on the 10-year Treasury note that matures in November 2019 — a benchmark for interest rates on mortgages and other consumer loans — fell to 3.60 percent from 3.64 percent late Thursday. Its price rose 11/32 to 98 6/32.

The GDP report, which topped forecasts of 4.5 percent, reassured investors that the economy is continuing to recover. However it also raised questions about how durable the recovery is since much of the growth came from companies replenishing low inventories.

Disappointing earnings in the technology sector dragged down stocks, increasing the appeal of safe-haven assets like Treasurys. The Dow Jones industrial average lost 53 points, or 0.5 percent.

The yield on the two-year note maturing in January 2012 fell to 0.82 percent from 0.87 percent. Its price rose 3/32 to 100 3/32.

The yield of the 30-year bond that matures in November 2039 fell to 4.50 percent from 4.55 percent, while its price rose 29/32 to 98 1/32.

The yield on the three-month T-bill that matures April 29 fell to 0.06 percent from 0.07 percent. The discount rate was 0.07 percent.

The cost of borrowing between banks was unchanged. The British Bankers’ Association said the rate on the three-month loans in dollars — the London Interbank Offered Rate, or Libor — was at 0.24906 percent.