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Treasury Yields Drop to Record Lows as Recession Concern Rises

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Daniel Kruger and Dakin Campbell
Bloomberg
Thursday, Nov 20, 2008

Treasury yields declined to record lows, with two-year notes dropping below 1 percent for the first time, as global stocks slumped and a deepening recession drove investors to the safest assets.

Yields on two- and five-year notes and 30-year bonds dropped to the least since the Treasury began regular issuance of the securities. Ten-year note yields touched the lowest since 2003 after yesterday’s release of the minutes of last month’s Federal Reserve meeting showed policy makers expect the economy to contract through the middle of 2009 and more interest-rate cuts may be needed to counter deflation.

“Fear is dominating the market place,” said Andrew Richman, who overseas $10 billion in fixed-income assets as a strategist in West Palm Beach, Florida, for SunTrust Bank’s personal asset management division. “People are seeing their net worth evaporate.”

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Investors turned to government debt as recessions in the U.S., Europe and Japan hurt corporate earnings and drove prices of shares, commodities and real estate lower. Stocks declined worldwide, with the MSCI World Index losing 2.12 percent.

The 10-year yield dropped 19 basis points to 3.14 percent, the lowest level since June 2003, at 9:01 a.m. in New York, according to BGCantor Market Data. The 3.75 percent security due November 2018 rose 1 20/32, or $16.25 per $1,000 face amount, to 105 6/32. The yield on the two-year note fell 8 basis points to 0.99 percent.

  • A d v e r t i s e m e n t

Longer Maturities

The 30-year yield fell 17 basis points to 3.74 percent, the lowest level since regular sales started in 1977. Yields on five-year notes declined to 1.93 percent, not seen since 1954, according to data compiled by Bloomberg and the Fed.

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This article was posted: Thursday, November 20, 2008 at 12:01 pm





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