Interest rates fall as some questions about European debt problems

Interest rates fall, some traders eye stocks

CHARLOTTE, N.C. — Interest rates fell in the bond market Tuesday as some investors remained concerned over European debt levels and others moved money back into stocks.

Bond prices have risen in recent weeks, sending their yields lower, as Greece’s struggles to contain its huge budget deficits undermined the euro currency and sent investors in search of safe harbors.

Those concerns eased during this holiday-shortened week thanks to upbeat earnings reports and a fresh round of corporate dealmaking. Markets were closed Monday for President’s Day.

The yield on the 10-year Treasury note maturing in February 2020, a benchmark for interest rates on many consumer loans, fell to 3.66 percent in late trading from 3.70 percent Friday. Its price rose 9/32 to 99 21/32.

Bond prices had edged lower in the morning after a report showed foreign demand for U.S. government bonds fell by the largest amount on record in December. The reductions in holdings, if they continue, could force the U.S. government to make higher interest payments at a time when it’s dealing with record federal deficits.

The Dow Jones industrial average gained nearly 170 points, with most market indexes up around 1.5 percent. European markets rose following new plans by European Union leaders to push Greece to get its budget under control. On Monday, European leaders said Greece will have another month to come up with a plan to cut its deficit.

Bond and stock investors have been concerned that Greece’s fiscal troubles could undermine Europe’s common currency, the euro, and destabilize debt markets.

“Yes, there is a sovereign credit story out there, and everybody knows it’s supposed to be a big thing,” said Howard Simons, strategist with Bianco Research in Chicago. “Today, however, we have no new negative news.”

In other trading, the yield on the 30-year bond maturing in February 2040 fell to 4.64 percent from 4.65 percent. Its price rose 10/32 to 99 27/32.

The yield on the two-year note that matures in January 2012 fell to 0.81 percent from 0.84 percent, while its price rose 1/32 to 100 4/32.

The yield on the three-month T-bill that matures May 20 was unchanged at 0.09 percent. Its discount rate was 0.09 percent.