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Treasury prices jump as stocks slide

January 21, 2010 | The Associated Press

NEW YORK (AP) -- Interest rates fell in the bond market Wednesday as concerns grew that reduced bank lending in China would disrupt a global economic recovery.

A big drop in stocks boosted demand for government debt. Yields fell as Treasury prices rose.

The yield on the 10-year Treasury note that matures in November 2019 -- a benchmark for interest rates for mortgages and other consumer loans -- fell to 3.65 percent in late trading from 3.70 percent late Tuesday. Its price rose 13/32 to 97 23/32.

Investors moved into Treasurys after a top Chinese regulator said banks there would lend less this year to keep the country's economy from growing too quickly. A slowdown in China could disrupt nascent growth in other economies.

The dollar jumped to a five-month high against the euro as questions intensified about debt levels in Greece.

Disappointing corporate profits also weighed on stocks. The Dow Jones industrial average fell from a 15-month high, losing 122 points for its biggest drop in a month. It had been down more than 200 during trading.

A report that inflation remains tame also helped Treasurys. The Labor Department said that inflation at the wholesale level fell in December as energy costs dropped. Wholesale prices rose 0.2 percent, well below the 1.8 percent jump in November.

A report last week found that consumer prices are also in check.

The yield of the 30-year bond that matures in November 2039 fell to 4.54 percent from 4.59 percent. Its price rose 29/32 to 97 12/32.

The yield on the two-year note maturing in December 2011 fell to 0.88 percent from 0.90 percent, while its price rose 1/32 to 100 7/32.

The yield on the three-month T-bill that matures April 22 fell to 0.04 percent from 0.05 percent. Its discount rate stood at 0.05 percent.

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