Treasury prices gain as stock markets swoon over the latest worries about the euro

Stock market volatility sends money into Treasurys

NEW YORK — Interest rates fell in the Treasury market Tuesday as investors dumped stocks in a late-day selloff triggered by news that the government had started a criminal investigation into the Gulf oil spill.

Treasury prices, which move in the opposite direction from their yields, fell earlier in the day on fresh signs of vitality in the U.S. economy. Government reports on construction spending and manufacturing activity both came in stronger than expected. Bonds tend to fall on positive signals on the economy, which increases demand for stocks and other riskier assets.

But prices turned higher late in the day and yields fell after U.S. Attorney General Eric Holder said the government had started criminal and civil investigations into the oil spill in the Gulf of Mexico. That sent the shares of BP PLC and other oil companies lower, and other stocks followed. The Dow Jones industrials ended with a loss of 112 points after trading erratically for much of the day.

The latest troubles for Europe’s common currency was also keeping investors conservative, increasing demand for bonds. The euro touched another four-year low on Tuesday, helping to send most European stock markets lower.

The yield on the 10-year Treasury note, a widely used benchmark for consumer loans, edged down to 3.27 percent from 3.29 percent Friday. U.S. markets were closed Monday for Memorial Day.

The price of the 10-year note, which moves opposite to its yield, rose 31.25 cents to $101.96875.

In other trading, the yield on the 30-year Treasury bond fell to 4.18 percent from 4.20 percent. Its price rose 59.375 cents to $103.28125.

The yield on the two-year note fell to 0.77 percent from 0.78 percent. Its price barely budged higher.

The yield on the three-month Treasury bill was unchanged at 0.15 percent. Its discount rate was 0.16 percent.