Treasury Prices Rise Amid Sharp Sell-off in Stocks

Treasury prices rose for a second consecutive trading day Monday as investors clamored for the safety of government debt amid a sharp sell-off in stocks and commodities.

Demand for Treasurys spiked as the World Bank lowered its forecast on the global economy, touching off fresh fears that a recovery from the recession is further off than previously hoped. The World Bank said it expects the global economy to shrink by 2.9 percent this year — more than the 1.7 percent decline previously forecast.

The revised outlook sent prices for riskier assets like stocks and commodities falling. The benchmark Standard & Poor's 500 index dropped more than 3 percent, while the Dow Jones industrials lost 2.4 percent. Commodities like gold, oil and grains also suffered steep losses.

Meanwhile, the Federal Reserve bought up $7.5 billion in bonds having maturity dates ranging from four to seven years. The Fed has been buying up huge amounts of government debt to help offset the surplus being pumped into the system and to keep borrowing costs low.

The purchases come as the Treasury prepares to auction off $104 billion in two-, five- and seven-year notes in a series of auctions starting Tuesday.

Investors have been keenly focused on Treasury auctions in recent weeks, concerned that the massive amounts of debt the government is issuing to fund its stimulus programs will be met with weak demand.

Investors are also anxious ahead of the Federal Reserve's two-day policy meeting, which begins Tuesday. Investors are looking for any clues on whether the central bank will shift policy and raise its benchmark interest rate later this year, or keep it at the current record low level of near zero.

As the Dow Jones industrial average tumbled 200 points, the yield on the 10-year Treasury note slipped to 3.69 percent from 3.78 percent late Friday. Investors keep a close watch on the 10-year note because its yield is closely tied to interest rates on mortgages and other consumer loans. Its price rose 25/32 to 95 11/32.