10-yr yield hits record low on Europe debt fears

AP News
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Posted: Sep 12, 2011 4:46 PM
10-yr yield hits record low on Europe debt fears

The yield on the 10-year Treasury note hit another record low on Monday as fears intensified that Greece will default on its debt.

The Treasury Department auctioned three-year notes at a record-low yield as traders rushed to buy investments seen as lower-risk.

The yield on the 10-year note was 1.95 percent at 4:40 p.m. compared with 1.92 percent late Friday. It fell earlier to 1.87 percent, the lowest since the Federal Reserve Bank of St. Louis began keeping daily records in 1962. During the financial crisis in late 2008, the 10-year yield hit a low of 2.05 percent.

Greece is struggling to show its neighbors that its debts are under control. Some are threatening to withhold its next round of bailout money. A default by Greece would cause the value of its government bonds to plunge. That could destabilize European banks that hold Greek debt.

Those fears caused the stocks of major French and German banks to sink by as much as 10 percent Monday.

There are few safe places remaining for traders to stash the billions of dollars flowing out of global stock markets, banks and European debt markets, analysts say. The dollar hit a seven-month high against the euro as concerns about Europe's economic stability added to demand for lower-risk investments. The euro also hit a 10-year low against the Japanese yen.

That demand was apparent in an afternoon auction of three-year Treasury notes that were priced to yield 0.334 percent, the lowest auction yield on record. Yet demand was roughly the same as at recent auctions, analysts said.

More auctions are planned in the coming days. The Treasury Department will auction 10-year notes Tuesday and 30-year bonds Wednesday.

The price of the 10-year note fell 25 cents for every $100 invested. Bond yields rise as their prices fall.

The 30-year bond's yield was nearly flat at 3.25 percent. Its price fell 6 cents per $100 invested.

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