(Bloomberg News) Treasury 10-year note yields decreased to an all-time low as concern Europe's sovereign-debt crisis will cripple the region's financial institutions underpinned demand for the safest assets.
Yields on 30-year bonds touched the lowest level since January 2009 on speculation Federal Reserve Chairman Ben. S. Bernanke may signal in a speech this week that the central bank will purchase longer-duration debt while shedding shorter maturities. Ten-year notes are the most overvalued ever, according to a financial model created by Fed economists that includes expectations for interest rates, growth and inflation.
"These yield levels are going to be persistent," said Ira Jersey, an interest-rate strategist in New York at Credit Suisse Group AG, in an interview on "Bloomberg Surveillance" with Tom Keene. "Given the weakness in the economic data and a lot of fears in Europe, yields could stay here for the better part of four, five, six months, if not longer." The firm is one of the 20 primary dealers that trade with the Fed.
Benchmark 10-year note yields decreased one basis point, or 0.01 percentage point, to 1.98 percent at 12:06 p.m. in New York, according to Bloomberg Bond Trader prices. The 2.125 percent securities maturing in August 2021 rose 3/32, or 94 cents per $1,000 face amount, to 101 9/32. The yields earlier slid to 1.9066 percent, the lowest on record.
A gain in 30-year bonds pushed yields down seven basis points to 3.24 percent after they fell to 3.20 percent, a level not seen in more than two years. Two-year note yields were little changed at 0.20 percent.
Yields pared their decreases as the Standard & Poor's 500 Index reduced its drop to 1.9 percent after earlier today falling 2.9 percent.
Longer-term Treasuries led today's gains as investors speculated the Fed may buy those maturities to support the economy under what is known as Operation Twist.
"Bernanke will not sit around and wait for things to deteriorate," said Sean Murphy, a trader in New York at Societe General SA, a primary dealer. "The market has strengthened the case for him to provide further accommodation. The most viable option for now is the twist."
The central bank acquired today $730 million of Treasuries maturing from April 2013 to February 2014. The purchases are part of the Fed's policy to continue to reinvest the proceeds of maturing assets on its balance sheet to prevent a tightening of monetary policy.