Treasury prices rise as riskier investments fall

AP News
Posted: Oct 17, 2011 4:31 PM
Treasury prices rise as riskier investments fall

U.S. Treasury prices rose Monday as Europe's failure to resolve its debt crisis increased demand for ultra-safe investments.

Traders should not expect a plan before next week's summit of European Union leaders, German finance chief Wolfgang Schaeuble said Monday. German Chancellor Angel Merkel's spokesman called hopes for a detailed plan "dreams" that "will again not be fulfilled."

Traders sold stocks and bought safer, lower-return investments such as Treasurys. The price of the 10-year Treasury note rose 81 cents for every $100 invested, pushing its yield down to 2.16 percent at 3:45 p.m. Eastern time, from 2.25 percent late Friday.

Treasury prices fell last week on hopes that France and Germany were close to solving the European debt crisis. Traders bid up higher-risk investments such as stocks. The Standard & Poor's 500 index had its best week in two years.

Treasury prices were still falling when trading began on Monday. The 10-year yield reached 2.29 percent, the highest in two months.

After the comments from Germany were reported, traders reversed course, selling riskier investments and buying safer ones. European markets fell and U.S. stocks also moved sharply lower. U.S. indexes plunged 2 percent.

The price of the 30-year Treasury bond rose $1.91 for every $100 invested, pushing its yield down to 3.14 percent from 3.23 percent late Friday. The yield went as high as 3.29 percent earlier Monday.

Collusion Against Kavanaugh
Rebecca Hagelin

Bond yields fall as demand for them increases. Yield is the return a trader receives from holding a bond. The yield falls when traders are willing to accept an even tinier return in exchange for an investment that is seen as safe.

The two-year Treasury note's yield fell to 0.25 percent from 0.27 percent late Friday. The yield on the three-month Treasury bill rose to 0.03 percent from 0.02 percent. Its discount wasn't available.