Sunday, March 4, 2007

Bonds

Global investors moved their money out of tumbling stocks and into the safety of Treasurys last week, sending yields plunging across the curve.

The yield on the benchmark 10-year Treasury fell 17 basis points last week, to close at 4.5 percent. The yield on the two-year note fell 27 basis points, to 4.53 percent.

Stock losses combined with mixed economic data and turmoil in other credit markets to sour many economic forecasts. Investors responded by boosting bets that the Federal Reserve will cut short-term interest rates by summer to give the economy a lift.

But inflation also flared in January, according to the Fed's preferred Commerce Department gauge, making it more likely the central bank will hold interest rates steady for a while.

Tomorrow, Treasury will sell $21 billion in three-month bills and $17 billion in six-month bills, which yielded 5.14 percent and 5.09 percent, respectively, in when-issued trading Friday. Also tomorrow, Treasury will announce details of an auction of four-week bills to be held Tuesday.

-- Nell Henderson


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