Bonds rise on cloudy outlook for financial firms
Investors fear more weakness from banks and brokerages. Fannie Mae and Freddie Mac remain in the spotlight.
NEW YORK (CNNMoney.com) -- Treasury prices rose Wednesday as lingering concerns about the health of the financial services sector spurred demand for the relative safety of government-backed bonds.
The benchmark 10-year note rose 9/32 to 101 21/32, lowering its yield to 3.80% from 3.83% late Tuesday. Bond prices and yields move in opposite directions.
The 30-year long bond was up 12/32 at 100 30/32, and its yield fell to 4.44% from 4.46%.
The 2-year note held steady at 100 30/32 with a yield of 2.25%.
Stocks opened lower, but gained ground as oil prices eased. The major indexes were higher at midday.
Wall Street has been preoccupied with the fate of government-backed lenders Fannie Mae (FNM, Fortune 500) and Freddie Mac (FRE, Fortune 500), which have seen their share prices plummet recently, amid speculation that a government bailout will be necessary to keep them afloat.
The plight of Fannie and Freddie is seen by many investors as an indication that the credit crisis, which has wracked the nation's financial system, is far from over.
"There is still the fear of more writedowns," said Lee Smith, vice president and director of fixed-income at Cozad Asset Management. "Everyone is waiting for the next shoe to drop."
Signs of economic weakness usually benefit bonds because they are perceived as a relatively safe investment during times of financial stress. 
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