Interest rates fall after disappointing consumer confidence data, 2-year notes sale

Rates dip after weak consumer confidence data

CHARLOTTE, N.C. — Interest rates fell in the bond market Tuesday as investors sought safer investments in response to a disappointing report on consumer confidence.

A downgrade of Greece’s biggest banks by Fitch Ratings also fed worries about the economy.

The Conference Board said its consumer confidence index fell to 46 in February from 56.5 last month. That’s below the forecast of economists polled by Thomson Reuters, who expected a reading of 55.

“We’ve taken a hard look at that data and it could be storm related,” said Mike Wallace, global market strategist at Action Economics. Massive winter storms over the past month have shut down major cities across the nation, including Washington, D.C.

But, Wallace said, “the markets are going to react to the headline figures.”

Investors who were already uneasy about consumer spending began selling stocks and other investments seen as risky in a weak economy and transferred their money to Treasurys.

The yield on the 10-year Treasury note maturing in February 2020, which is a basis for rates on mortgages and other consumer loans, fell to 3.69 percent Tuesday from 3.80 percent late Monday. Its price rose 29/32 to 99 15/32.

Tuesday morning, Fitch Ratings lowered its issuer-default ratings on the four biggest banks in Greece to one notch closer to junk status. The ratings service cited that the banks’ already weakening asset quality and profitability will come under futher pressure as the Greek government makes fiscal adjustments.

Debt problems in Greece and other European nations have concerned investors in recent weeks.

Rising demand at a Treasury Department sale of $44 billion in two-year notes also had investors more interested in bonds.

The bid-to-cover ratio, a measure of demand, came in 3.33, higher than the 3.13 in an auction for notes with a similar maturity in January.

The yield on the two-year note that matures in January 2012 fell to 0.84 percent from 0.89 percent and its price rose 3/32 to 100 2/32. Yield and price move in opposite directions.

Two other auctions remain this week: a $42 billion offering of five-year notes Wednesday and a $32 billion sale of seven-year notes Thursday.

In other trading, the yield on the 30-year bond that matures in February 2040 fell to 4.63 percent from 4.73 percent. The price rose 1 19/32 to 99 28/32.

The yield on the three-month T-bill that matures May 27 rose to 0.11 percent from 0.09 percent. Its discount rate was 0.12 percent.