Treasury yields fall to records on Europe debt concern, economy

Bond & note futures reach record highs

Treasuries rose, pushing five-, seven- and 10-year yields to record lows, amid concern the European debt crisis is widening and as data showed the U.S. economic expansion slowed during the first quarter.

Thirty-year bond yields fell to the lowest since December 2008 as U.S. weekly jobless claims exceeded forecasts, stirring speculation that tomorrow’s May employment data may trail estimates. The euro erased gains as German, French, Canadian and Dutch 10-year yields all declined to records lows. The Federal Reserve bought $1.8 billion of Treasuries due from February 2036 to August 2041.

“If you look at the global marketplace, we are the supermarket of safety,” said William Larkin, a fixed-income money manager who helps oversee $500 million at Cabot Money Management Inc. in Salem, Massachusetts. “We’re talking about an elevated level of fear. This is mainly driven by growing uncertainty in Europe. People are saying ’I can buy the Treasury and I know my money will be returned to me.’”

The benchmark 10-year yield fell eight basis points, or 0.08 percentage point, to 1.54 percent at 11:21 a.m. New York time. The 1.75 percent security maturing in May 2022 gained 25/32, or $7.81 per $1,000 face amount, to 101 30/32.

The yield reached as low as a record 1.5309 percent, while five- and seven-year note yields reached set all-time lows.

Bond Yields

Thirty-year bonds yields declined 12 basis points to 2.60 percent. The record low was 2.5090 on Dec. 18, 2008, according to Fed figures beginning in 1953. The yield declined 17 basis points since yesterday, the biggest two-day drop since Nov. 1.

U.S. debt has returned 1.6 percent this month, according to indexes compiled by Bank of America Merrill Lynch. The MSCI All- Country World Index of shares slid 8.7 percent in the same period.

U.S. 10-year yields are down from 5.3 percent in June 2007, before the financial crisis intensified, and below the average of 4.96 percent during the past 20 years. Treasuries have returned 2.6 percent since the end of March, according to Bank of America Merrill Lynch indexes, after returning 9.8 percent last year, including reinvested interest, the most since 2008.

Trading volume yesterday rose to the highest since April 10. It reached $324 billion yesterday, up from $196 billion the previous day, through ICAP Plc, the world’s largest interdealer broker. The figure is above the 2012 average of $242 billion. Volume reached $439 billion on March 14, the highest since August.

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