Bloomberg News

Treasuries Snap Loss as Spain Downgrade Spurs Demand for Safety

October 19, 2011

Oct. 19 (Bloomberg) -- Treasury 10-year notes snapped a loss from yesterday after a Moody’s Investors Service downgrade of Spain’s credit rating added to concern that Europe’s sovereign-debt crisis is spreading.

Ten-year yields were about half a percentage point away from a record low as France and Germany strive to reach an agreement on bolstering a European bailout fund. The Federal Reserve is scheduled to buy $4.25 billion to $5 billion of Treasuries maturing from October 2017 to August 2019 today, according to the central bank’s website, as part of its plan to keep borrowing costs down.

“This is a pretty long, hard slog for Europe,” said Su- Lin Ong, head of Australian economic and fixed-income strategy at RBC Capital Markets in Sydney. “That will definitely cap any further backup in U.S. yields.”

Benchmark 10-year rates were little changed at 2.17 percent as of 6:29 a.m. in London, according to Bloomberg Bond Trader prices. The 2.125 percent security due in August 2021 changed hands at 99 18/32.

The notes were up as much as 7/32, or $2.19 per $1,000 face amount, in Asian trading.

The rate dropped to a record low of 1.6714 percent on Sept. 23.

--Editors: Jonathan Annells, Rocky Swift

To contact the reporters on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net; Wes Goodman in Singapore at wgoodman@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net


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