Treasuries Surge On Weak Housing Data

Treasuries rallied today, in the process driving two-year note deals to record lows and pushing 10-year securities below 2.5%, for the first time since March 2009 following weaker-than-expected home sales data for July.

The difference between the two-year note yield and the Fed’s target lending rate fell to the lowest level since December 2008. The government prepared for a $37 billion auction of two-year notes, a day after the demand for the sale of 30-year inflation-indexed bonds touched record levels.

“Fear is driving the Treasury market right now to lower rates,” remarked Jay Mueller of Wells Fargo. Mueller fears a double-dip recession in the not too distant future. The yield on the 10-year note fell “7 basis points, or 0.07 percentage point, to 2.53 %” at 12:46 pm EST, according to BGCantor Market Data.

The benchmark 10-year note’s yield earlier crashed to 2.4668 %, a new 17-month low. The two-year note yield dropped less than 1 basis point to 0.48 % after touching a record low of 0.4542 %. German 10-year yield also dropped to a record low. The Standard & Poor’s 500 Index fell 1.1 %. Credit-default swaps rose to a 7-week high. The Dollar took a nosedive of 1.8 % to 83.60 Yen, its lowest since June 1995. Crude oil for October declined 1.5 % to $72 a barrel.

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