US 10-yr Treasury yield falls to lowest on record

AP News
Posted: Sep 09, 2011 5:39 PM
US 10-yr Treasury yield falls to lowest on record

Nervous investors rushed to the safety of U.S. Treasury bonds Friday, sending yields on government debt to historic lows.

Fears about Europe's debt crisis led to a rally of U.S. Treasurys even as it sent the stock market tanking. The S&P 500 fell 2.7 percent after the unexpected resignation of a key European Central Bank official. The bank said its top economist left for personal reasons. Traders took his departure as a signal that there are no clear plans to stabilize the region's economy or prevent a default by Greece.

The yield on the 10-year Treasury note plunged to its lowest level since the Federal Reserve Bank of St. Louis began keeping daily records in 1962. It fell to 1.92 percent from 1.99 percent late Thursday. Its price rose 52 cents per $100 invested. Bond yields fall as their prices rise.

The yield bottomed out at 1.9054 percent around noon.

The historic low 10-year note yields will likely send mortgage rates even lower. This week, the average rate on a 30-year fixed mortgage fell to 4.12 percent. The last time rates were cheaper was in 1951, when most long-term home loans lasted just 20 or 25 years.

Traders worried over the resignation of a key central bank official because it revealed deepening divisions within Europe over how it plans to solve its economic problems, which traders fear could lead to a collapse of one of its heavily indebted economies. That would send shock waves through the global banking system.

In other trading, the yield on the 30-year Treasury bond fell to 3.25 percent from 3.31 percent late Thursday. Its price rose $1.28 for every $100 invested.

The three-month T-bill's yield was flat at 0.01 percent. Its discount wasn't available.