Tags: US | Credit | Markets

Interest Rates Fall as Investors Seek Haven From Spain

Friday, 28 May 2010 06:03 PM

 

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Interest rates dipped in the bond market Friday as fresh worries about Spain's creditworthiness led investors to buy up safe-haven assets like Treasurys.

Fitch Ratings lowered Spain's credit rating one notch, saying government austerity measures will "materially" hamper economic growth and reduce tax revenues. The move renewed investors' worries that efforts by European countries like Greece, Spain and Portugal to cut their debt loads could undercut the region's economy and spread weakness to other areas.

Uncertainty about the pace and size of a rebound led investors to continue their recent trend of parking money in Treasurys.

The yield on the 10-year note, which is often used as a benchmark for consumer loans and mortgages, fell to 3.29 percent in afternoon trading, from 3.36 percent Thursday. Its price rose 68.75 cents to $101.78125.

Treasury prices have soared in recent weeks, sending their yields sharply lower, because of caution over Europe's debt crisis. Earlier this week, yields on both the 10-year note and 30-year bond fell to their lowest levels of the year.

The trend of rising prices and falling yields had reversed itself over the past couple of days following upbeat U.S. economic reports on Wednesday and comments by China on Thursday that it wasn't considering reducing its holdings of European government bonds.

However, concerns that global growth may slow down prompted more safe-haven buying Friday.

The price of the 30-year bond rose $1.3125 cents to $102.90625, pushing its yield down to 4.20 percent from 4.26 percent.

In other trading, the yield on the two-year note fell to 0.78 percent from 0.86 percent. Its price rose 21.875 cents to $99.9375.

The yield on the three-year Treasury bill fell to 0.15 percent to 0.16 percent. It's discount rate stood at 0.16 percent.

© Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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