Bond prices surge
Recession fears and a plunging stock market have investors rushing to the safety of government bonds despite massive supply concerns.
NEW YORK (CNNMoney.com) -- Government bond prices rallied Friday, reversing the previous two day slide, as shell-shocked investors retreated from Wall Street.
On Thursday, stocks had plummeted to a six-year, and on Friday the losses looked to continue.
Investors have been unable to look beyond the global slowdown despite President Obama’s efforts to reignite the economy with a $787 billion stimulus package and a $75 billion foreclosures-prevention plan. As a result, investors are buying government debt, which is considered a safe haven when the economy is volatile.
A government report released Friday showed that consumer prices ticked up slightly in January, the first rise since July, but held steady on a year-over-year basis. Inflation decreases the value of fixed-income returns, but when prices slow their climb, fixed-income assets become more attractive.
Treasury prices have been bouncing up and down in recent sessions as investors shift their focus between the firmly entrenched recession and the government’s massive spending program.
The Treasury announced $94 billion worth of auctions slated for next week. The government said Thursday that it will sell $40 billion in 2-year notes, a record $32 billion in 5-year notes and a record $22 billion worth of reintroduced 7-year notes. Treasury's records go back to 1980.
Next week’s tally dwarfs the $67 billion quarterly refunding last week.
Bond prices: On Friday, the price of the 10-year note rose 30/32 to 100 and its yield fell to 2.76% from 2.86%. Bond prices and yields move in opposite directions.
The 30-year bond jumped 1-28/32 to 98-27/32, and its yield fell to 3.57% from 3.68%. The 2-year note edged up 4/32 to 99-29/32 and its yielded ticked down to 0.93% from 0.99%.
The yield on the 3-month note dipped to 0.28% from 0.32% late Thursday. Demand for the shorter-term note is seen as a gauge of investor confidence.
Lending rates: The 3-month Libor rate remained unchanged Friday at 1.25%, according to data on Bloomberg.com. The overnight Libor rate, meanwhile, dipped to 0.28% from 0.29%.
Libor, the London Interbank Offered Rate, is a daily average of rates that 16 different banks charge each other to lend money in London.
Two credit market gauges showed decreasing confidence in the credit markets. The "TED" spread widened to 0.97 percentage point from 0.95 percentage point. The bigger the TED spread, the less willing investors are to take risks.
The Libor-OIS spread increased to 1.02 percentage point from 1 percentage point. The bigger the spread, the less cash is available for lending. 
