Demand for Treasury securities rose sharply Tuesday after U.S. consumer sentiment weakened and talks to solve Europe's debt crisis appeared to splinter.
Consumers' views about the economy worsened in October to the lowest level since early 2009, when the U.S. was in a deep recession, the Conference Board said. Its index of consumer sentiment was the weakest since March 2009 and was much lower than analysts had expected.
European leaders appeared far from agreeing on a plan to prop up banks and prevent the crisis from spreading. A meeting among European finance ministers, planned for before a Wednesday summit, was canceled. Heads of European states still plan to convene late Wednesday, but it is not clear whether they will have a detailed agreement to present.
The price of the 10-year Treasury note rose 88 cents for every $100 invested, pushing its yield down to 2.14 percent at 3:07 p.m. Eastern time from 2.23 percent late Monday.
Treasurys have wavered in a narrow range for the past two weeks as traders awaited clearer signals about Europe's plans to stem its debt crisis. French and German leaders had promised a plan by month's end. They said last week that the plan would be unveiled Sunday. On Friday, the announcement was postponed until Wednesday.
During that time, the yield on the 10-year Treasury note remained between 2.09 percent and 2.28 percent. It stayed within that range during Tuesday's rally.
The latest delay made traders nervous that Europe's debt problems will spread into a wider financial crisis. They bought ultra-safe Treasurys and sold riskier investments, such as stocks, which could lose value more quickly if a crisis spread.
Bond yields fall when demand for them increases, pushing their prices higher. By paying higher prices, traders are agreeing to accept an even tinier return in exchange for holding an investment that is perceived as safe.
Separately Tuesday, a Treasury Department auction of two-year notes drew strong interest. The Treasury Department auctioned $35 billion in notes to yield 0.281 percent, compared to the 0.290 percent yield for two-year notes trading on the open market. That means traders' bids were higher than the market prices of similar investments.
The ratio of dollars bid to Treasurys sold was 3.64, compared to an average of 3.36 in the last four auctions, according to data from CRT Capital Group LLC. The higher bidding ratio also reflects strong interest in the auction.
The 30-year Treasury bond leaped $2.37 per $100 invested, pushing its yield down to 3.15 percent from 3.27 percent late Monday.
The yield on the 2-year Treasury note fell to 0.25 from 0.29 late Monday.
The yield on the three-month Treasury bill was unchanged at 0.01 percent. Its discount wasn't available.
Daniel Wagner can be reached at http://www.twitter.com/wagnerreports.