Treasury rates sink after Fed statement

Long-term interest rates hit record lows Tuesday after the Federal Reserve acknowledged that economic growth is more sluggish than it expected.

Long-term interest rates hit record lows Tuesday after the Federal Reserve acknowledged that economic growth is more sluggish than it expected.

The Fed pledged to keep a lid on short-term interest rates until at least the middle of 2013. Its benchmark federal funds rate has stood near zero for almost two more years.

The Fed's key lending rate acts as an anchor for yields on Treasurys due in coming years. So the Fed's decision will likely keep rates on one-year and two-year Treasury rates from rising, too. Those Treasury notes also happen to be favorite places for banks to park their cash.

The Fed's statement acknowledged that the economy was struggling but offered no real help, said Dan Greenhaus, chief global strategist at the broker BTIG.

"They did nothing," he said. "The concern among investors that a new recession will be met with a weak policy response was validated."

The Fed has targeted a range of zero to 0.25 for its overnight lending rate for banks since December 2008.

The Fed's monthly statements since then have usually said interest rates will be kept low for an "extended period." The promise to keep rates that low for a fixed term, through 2013, could give the economy a lift, said Thomas Simons, money market economist at Jefferies & Co. The Fed's move could push banks to lend, he said.

Eventually, Simons said, lower yields on those Treasurys will encourage buyers who want a better return to look elsewhere. Banks may decide to lend to small businesses and consumers at a higher interest rate, instead of sticking their cash in low-paying Treasurys.

"I think this is what the Fed's intention is," Simons said. "The Fed is thinking at some point this is going to turn into loan creation."

After the Fed released its statement, the yield on the 10-year Treasury briefly touched a record low of 2.03 percent, then quickly headed higher. The 10-year yield, used to set interest rates on a wide variety of loans including mortgages, previously reached a record low of 2.05 percent in December 2008.

By the end of Tuesday trading, the 10-year yield was at 2.26 percent, down from 2.34 percent late Monday. Its price rose 59.3 cents for every $100 invested. The yield on the two-year note settled at a record low of 0.20 percent. Bond yields fall when their prices rise.

Treasury yields were already near their lows for the year, after a stock market on Monday rout sent investors into Treasurys.

Earlier Tuesday, investors bought three-year Treasurys at a record-low interest rate, in the first government debt auction since Standard & Poor's cut the U.S. credit rating.

The Treasury sold $32 billion in three-year notes to yield 0.50 percent. That's a record low borrowing rate for an auction of those notes. Investors placed bids for 3.29 times the $32 billion up for sale, the strongest show of demand since November 2009.

In other Treasury trading, the 30-year bond rose 90.6 cents. Its yield fell to 3.61 percent, down from 3.67 percent late Monday.

In the market for short-term Treasury bills, the three month T-bill paid a 0.02 percent yield. Its discount was 0.03 percent.

In Other News

fake money

Keywords clouds text link

 máy sấy   thịt bò mỹ  thành lập doanh nghiệp
Visunhomegương trang trí  nội thất  cửa kính cường lực   lắp camera Song Phát thiết kế nhà 

Our PBN System:  thiết kế nhà xưởng thiết kế nội thất thiết kế nhà tem chống giả ban nhạ  ốp lưngGiường ngủ triệu gia  Ku bet ku casino buy fake money máy sấy buồn sấy lạnh

mặt nạ  mặt nạ ngủ  Mặt nạ môi mặt nạ bùn mặt nạ kem mặt nạ bột mặt nạ tẩy tế bào chết  mặt nạ đất sét mặt nạ giấy mặt nạ dưỡng mặt nạ đắp mặt  mặt nạ trị mụn
mặt nạ tế bào gốc mặt nạ trị nám tem chống giả  công ty tổ chức sự kiện tổ chức sự kiện
Ku bet ku casino
Sâm tươi hàn quốc trần thạch cao trần thạch cao đẹp

suất ăn công nghiệpcung cấp suất ăn công nghiệp

© 2020 US News. All Rights Reserved.