Treasurys move higher on ongoing worries about European debt; 10-year yield at 3.56 pct

By Ieva M. Augstums, AP
Wednesday, May 5, 2010

Treasurys continue to gain on Greece debt concerns

CHARLOTTE, N.C. — Interest rates fell in the bond market Wednesday as investors continued to seek safety while Europe’s debt crisis dragged on.

The benchmark 10-year note’s yield dipped to its lowest level since December.

Market participants have been worried that Greece could default on its debt and that the trouble there would spread to other weak European economies like Spain or Portugal. There is also uncertainty about whether a $144 billion aid package for Greece will stem the growing debt crisis.

Those concerns are overshadowing upbeat domestic economic reports in the U.S this week, helping to drive up Treasury prices and push down their yields. Investors tend to bid up prices of Treasurys if they expect turmoil in other markets.

The yield on the 10-year Treasury note fell to 3.54 percent in late trading Wednesday, after sliding below 3.50 percent earlier in the day. It was 3.60 percent late Tuesday. Its price rose 40.625 cents to $100.6875 on Wednesday.

The yield on the 10-year note, which matures February 2020, is linked to rates on mortgages and other consumer loans. It has dipped over the past month after briefly rising to 4 percent in April, its highest level since June.

An encouraging report on employment and tame news on the service sector did little to ease Treasury prices.

Payroll company ADP said private employers added 32,000 jobs last month. That was slightly above expectations.

The ADP report is seen an early indicator of the government’s closely watched monthly employment report, which is due on Friday. The Labor Department is expected to report that April’s unemployment rate was unchanged at 9.7 percent.

The Institute for Supply Management said that the services industries expanded in April at a slower pace than economists expected. Its service sector index was unchanged at 55.4 in April from March. Analysts expected an increase.

In other trading, the yield on the 2-year note that matures in April 2012 fell to 0.87 percent from 0.96 percent, while its price rose 15.625 cents to $100.25.

The yield on the 5-year note that matures in April 2015 fell to 2.28 percent from 2.38 percent. Its price rose 43.75 cents to $101.

The yield on the 30-year bond that matures in February 2040 fell to 4.39 percent from 4.42 percent. Its price rose 53.125 cents to $103.96875

The yield on the three-month Treasury bill that matures August 5 was fell to 0.14 percent from 0.15 percent. Its discount was 0.15 percent.

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