Interest rates fall as weak US housing figures boost buying of safe-haven assets

Interest rates fall on weak US housing figures

NEW YORK — Interest rates fell in the bond market Wednesday as a disappointing U.S. housing report boosted demand for safer investments like Treasurys.

The Commerce Department said home construction and applications for building permits slumped in May following the end of a homebuyer tax credit in April.

Construction of homes and apartments fell 10 percent from a month earlier to an annual rate of 593,000. That was below the 650,000 economists had forecast. Construction of single-family homes fell 17 percent, the largest drop since January 1991.

Applications for building permits fell 5.9 percent to the lowest level in a year. Analysts had forecast an increase. Demand for permits is an indicator of future homebuilding activity.

The report raised concerns that weaker demand for homes will derail an economic rebound, pushing Treasurys higher and interest rates lower.

The yield on the 10-year Treasury note, a widely used benchmark for mortgages and other consumer loans, fell to 3.27 percent from 3.31 percent late Tuesday. The price of the note maturing in May 2020 rose 31.25 cents to $101.96875.

Stocks came off their lows of the session after BP’s agreement to create a $20 billion fund for victims of the Gulf of Mexico oil spill. That eased some of investors’ worries about the company’s ability to handle the widening disaster and its impending legal fallout. The Dow Jones industrial average closed up about 5 points.

In other trading, the yield on the 30-year Treasury bond maturing in May 2040 fell to 4.19 percent from 4.22 percent. Its price rose 59.375 cents to $103.1875.

The yield on the two-year note that matures in May 2012 fell to 0.74 percent from 0.76 percent. The price rose 3.125 cents to $100.3125

The yield on the three-month Treasury bill maturing on Sept. 16 rose to 0.09 percent from 0.08 percent.