Bloomberg- Treasury two-year notes rose for the first time since April as investors sought refuge from possible hedge fund losses.
Two-year yields fell more than 10-year yields this week, increasing the yield premium of the longer-term debt to the most since October 2005, as Bear Stearns Cos. offered to provide $3.2 billion in loans to bail out one of its money-losing hedge funds. The Federal Reserve is forecast by economists to hold its benchmark lending rate steady at its meeting next week.
“We’ve seen a flight to quality because people can’t get a handle on the implications of a liquidation out of Bear Stearns,” said Thomas Atteberry, who manages $2.3 billion in fixed-income assets in Los Angeles at First Pacific Advisors.
Two-year note yields fell 12 basis points, or 0.12 percentage point, to 4.91 percent this week, according to bond broker Cantor Fitzgerald LP. The price of the 4 7/8 percent security due in May 2009 rose 7/32, or $2.19 per $1,000 face value, to 99 30/32, for the first weekly gain since April 20.
Benchmark 10-year notes had their first weekly gain since May 4, pushing yields down 4 basis points to 5.13 percent. The spread between 10- and two-year notes reached 23 basis points yesterday.
