30-year Treasury bonds auction at record low yield

AP News
Posted: Sep 14, 2011 5:21 PM
30-year Treasury bonds auction at record low yield

The Treasury Department auctioned 30-year bonds at a record low yield Wednesday as fears about Europe and the U.S. economy fed demand for lower-risk investments.

The government sold $13 billion of bonds at a yield of 3.31 percent. That's slightly lower than the yield just before the auction closed. The lower yield indicates that demand for the bonds was strong.

At 5 p.m. Eastern time, the 30-year bond's yield was 3.27 percent, compared with 3.33 percent late Tuesday. Its price rose $1.75 for every $100 invested.

The yield on the 10-year Treasury note was steady at 1.99 percent. Its price rose 6 cents per $100 invested.

Demand has grown for longer-term Treasurys because many expect the Federal Reserve to start buying them this fall. That would make the bonds more valuable and lower their yields.

The Fed's goal is to boost the sagging economy by reducing long-term interest rates. Lower rates might drive traders to buy stocks, which carry more risk but can offer higher returns.

Demand for Treasurys has been strong as traders seek relatively low-risk places to park money. Stock markets have been extremely volatile since early August, reacting sharply to small bits of news about Europe's debt crisis or the U.S. economy.

A disappointing report on U.S. retail sales Wednesday reinforced signs that consumers were discouraged in August. Americans were shaken by the stock market's gyrations and political gridlock that caused the first-ever downgrade of the U.S. government's credit rating.

The weak economic data increased demand for lower-risk investments like Treasurys.

Some investors are delaying major trades until the Fed's policy group meets next week.

The yield on the two-year Treasury note fell to 0.19 percent from 0.21 percent late Tuesday.

The yield on the three-month Treasury bill was flat at 0.01 percent. Its discount wasn't available.