Treasurys soar higher on ongoing worries about European debt; 10-year yield at 3.40 pct

Treasury prices skyrocket as stocks plunge

CHARLOTTE, N.C. — Interest rates plummeted in the bond market Thursday as stocks swooned on the latest worries about Europe’s debt crisis.

Traders barreled into Treasurys as the Dow Jones industrial average took a spectacular plunge of nearly 1,000 points in early afternoon trading. Stocks quickly recovered the worst of their losses but the Dow still ended the day down 348 points.

The losses were made worse by computer-driven trading, and were driven by worries that Greece’s debt crisis would spread.

The yield on the 10-year Treasury note fell to 3.40 percent late Thursday, sliding from 3.54 percent late Wednesday. Its price rose $1.15625 to $101.84375. Its yield dipped as low as 3.27 percent earlier in the day, its lowest level in seven months.

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.

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

Those concerns escalated Thursday, and are overshadowing stronger 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.

In other trading, the yield on the 2-year note that matures in April 2012 fell to 0.80 percent from 0.87 percent, while its price rose 12.5 cents to $100.375.

The yield on the 5-year note that matures in April 2015 fell to 2.17 percent from 2.28 percent. Its price rose 56.25 cents to $101.5625.

The yield on the 30-year bond that matures in February 2040 fell to 4.21 percent from 4.39 percent. Its price rose $3.03125 to $107.

The yield on the three-month Treasury bill that matures August 5 fell to 0.10 percent from 0.15 percent. Its discount rate was 0.11 percent.