Treasury prices rise on Europe's credit woes

AP News
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Posted: May 16, 2011 5:19 PM
Treasury prices rise on Europe's credit woes

Treasury prices were higher Monday as the ongoing financial crisis in Europe led investors to seek safer assets.

The price of the 10-year Treasury note inched up 21.8 cents per $100 invested in late trading. Its yield, which moves in the opposite direction, fell to 3.15 percent from 3.17 percent late Friday.

European finance ministers agreed Monday to give Portugal $110 billion in rescue loans so it could overhaul its economy. But the ministers have yet to decide on a second rescue package for Greece to help that country avoid catastrophic default.

Bond prices also got a boost when an index that is used to measure manufacturing business conditions in New York State weakened to its lowest level in five months. The New York Federal Reserve's Empire State Index fell to 11.88 in May from 21.70 in April.

Traders tend to buy Treasurys when the economy appears softer.

Treasury prices have been hovering at or near highs for the year, so investors are hesitant to bid up prices any more, said Kim Rupert, managing director of global fixed income analysis at Action Economics.

"That's muting buyer enthusiasm," she said.

Traders took news that the U.S. hit its debt limit in stride on Monday, mostly because the Treasury Department finagled ways to allow the government to continue to borrow until Aug. 2, Rupert said.

In other trading, the price of the 30-year Treasury bond rose 56.2 cents per $100 invested, while its yield fell to 4.27 percent from 4.31 percent. The yield on the two-year note slipped to 0.53 percent from 0.55 percent.

The yield on the three-month T-bill was unchanged at 0.01 percent. Its discount was 0.03 percent.