Treasury Prices Post Modest Gains

Treasury prices rose modestly Wednesday as investors remain skittish about the speed and strength of an economic recovery.

Prices for long-term Treasury bonds advanced for the fourth time in five days, lifted by investors seeking safety in government debt amid concerns about consumers' unwillingness to spend and the possibility that their hesitance will delay a recovery. Treasurys held onto gains from early in the day, even as investors reversed their strategy and started buying stocks, lifting Wall Street from an initial slide.

The benchmark 10-year Treasury note rose 14/32 to 101 13/32, driving its yield down to 3.46 percent from 3.52 percent late Tuesday.

"We started out with a flight to quality bid, but when stocks turned around," bond prices didn't decline, said Howard Simons, a strategist with Bianco Research in Chicago. That runs counter to how bonds have been trading recently, he noted.

Simons said bonds did come off their morning highs, but investors might see Wednesday's stock gains as a short-term rally and are thus holding onto their positions in bonds.

The Dow Jones industrial average, which had fallen more than 85 points earlier in the day, closed up 61, or 0.7 percent. The broader Standard & Poor's 500 index gained nearly 7 points, or about 0.7 percent.

Investors not yet comfortable with heading back into riskier stocks are also looking for safe investments with yields better than money market or savings accounts, Simons said. Treasurys provide such an investment, which has kept demand strong and boosted prices.

In other trading, the 30-year bond rose 1 2/32 to 103 16/32, and its yield fell to 4.29 percent from 4.36 percent.

The two-year note rose 3/32 to 100 and its yield fell to 0.99 percent from 1.03 percent.

The yield on the three-month T-bill dipped to 0.16 percent from 0.17 percent. Its discount rate was 0.17 percent.

The cost of borrowing between banks fell. The British Bankers' Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — slid to 0.42 percent from 0.43 percent.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.