Treasury bond yields dive as investors rush for safety
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The Federal Reserve said buy bonds. Investors worldwide are complying -- at the expense of nearly every other asset.
Long-term Treasury bond yields are plummeting again, one day after the Fed said it would shift its massive bond holdings more toward longer-term securities, hoping to pull interest rates on those issues down further.
The 30-year T-bond was at 2.80% at about 10:50 a.m. PDT, down from 3.00% on Wednesday and 3.20% on Tuesday.
The 10-year T-note (charted below), a benchmark for mortgage rates, was at 1.73%, a new 60-year low and down from 1.86% on Wednesday and 1.94% on Tuesday.
Meanwhile, investors are dumping stocks and commodities in a blistering sell-off. The Dow Jones industrial average was off 425 points, or 3.8%, to 10,699 at about 10:50 a.m. PDT, after falling 283 points on Wednesday.
Most European stock markets fell between 4% and 5% overnight.
The ThomsonReuters/Jefferies CRB index of 19 major commodities was down 4.4%, the biggest drop since May 5.
The Fed also gave investors another reason to head for the relative safety of bonds: In its post-meeting statement Wednesday, the Fed warned of ‘significant downside risks to the economic outlook.”
Although the central bank’s move to pull down longer-term interest rates is a form of economic stimulus, investors are focusing on the risk that it won’t be enough to offset the other forces battering the global economy -- including growing pessimism among U.S. consumers and Europe’s worsening debt crisis.
The rush to bonds and dive in stocks and commodities suggests that investors believe “there is no cavalry coming to the rescue,” said Barry Ritholtz, head of equity research at FusionIQ in New York.
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-- Tom Petruno