Bloomberg News

Treasuries Pare Losses as Investors Lose Appetite for Risk

July 27, 2011

July 27 (Bloomberg) -- Treasuries pared losses amid speculation U.S. debt will still attract investors even if the nation’s credit rating is downgraded.

Bonds were little changed as stocks fell, pushing the Standard & Poor’s 500 Index down as much as 1.6 percent, its biggest intraday drop in two weeks. Pacific Investment Management Co.’s Mohamed A. El-Erian said the risk of a credit downgrade is 50 percent even if lawmakers reach an agreement to lift the nation’s debt ceiling before an Aug. 2 deadline.

“We could grind back lower in yields because there’s a lot of cash out there looking for a home,” said Sergey Bondarchuk, an interest-rate strategist in New York at BNP Paribas SA, one of the 20 primary dealers that trade directly with the Federal Reserve. “Even if Treasuries were downgraded, there’s not a lot out there in terms of alternatives.”

Yields on five-year notes were little changed at 1.49 percent at 10:37 a.m. in New York, according to Bloomberg Bond Trader prices. Benchmark 10-year notes yielded 2.96 percent. That compares with a 4.06 percent average over the past decade.

--With assistance from Wes Goodman in Singapore. Editors: Greg Storey, Dennis Fitzgerald

To contact the reporter on this story: Susanne Walker in New York at

To contact the editor responsible for this story: Dave Liedtka at

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