Fitch downgrades help Treasury prices recover

AP News
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Posted: Oct 07, 2011 4:06 PM
Fitch downgrades help Treasury prices recover

Treasury prices trimmed their losses Friday afternoon after the credit ratings of Italy and Spain were downgraded. Treasurys fell earlier in the day after a U.S. jobs report came in stronger than analysts expected.

Fitch Ratings downgraded Italy and Spain's sovereign credit ratings at midday, citing their heavy debt loads and poor prospects for growth. Fitch also said it might lower Portugal's debt rating before the end of the year. Portugal was the third European country to receive a bailout, after Greece and Ireland.

The rating cuts revived fears about the European debt crisis. Italy and Spain have the third- and fourth-largest economies in Europe, and Europe's bailout fund is too small to manage a default by either of them.

The 10-year Treasury note rose shortly after Fitch's announcement, pushing its yield down to 2.06 percent at 4 p.m. Eastern time from 2.11 percent just after noon.

Treasury prices fell early Friday after the government reported that U.S. employers added 103,000 jobs last month, double what analysts were expecting. That decreased demand for safe-harbor investments, leaving Treasury prices down slightly compared with late Thursday.

In late trading, the price of the 10-year note was down 62 cents per $100 invested compared with a day earlier. The note yielded 1.99 percent late Thursday.

The price of the 30-year Treasury bond fell $1.28 per $100 invested. Its yield was 3.01 percent versus 2.95 percent late Thursday.

The yield on the two-year Treasury note rose to 0.29 percent from 0.27 percent late Thursday.

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