Treasurys rise on economic jitters

NEW YORK (CNNMoney.com) -- Treasurys rose Wednesday as investors flocked to the security of U.S. debt amid concerns about a global economic slowdown.

What prices are doing: The benchmark 10-year note rose 2/32 to 99-9/32 late Wednesday after rallying earlier, and its yield fell to 2.62% from 2.77% on Tuesday. Bond prices and yields move in opposite directions.

The 30-year bond jumped 5/32 to 108-3/32 with a yield of 3.91%.

The 2-year note gained less than 1/32 to 100-7/32 and yielded 0.52%, while the 5-year note added 1/32 to 101-18/32 with a yield of 1.43%.

What's moving the market: Prices were supported by government figures that showed the U.S. trade gap widened, and data on the Chinese economy further raised worries about the global recovery.

The advance came one day after the Federal Reserve said the economic recovery has weakened, and announced plans to reinvest in the Treasury market.

Meanwhile, investors submitted bids totaling nearly $73 billion in response to the government's sale of $24 billion worth of 10-year notes.

The median yield at Wednesday's auction was 2.67%, marking the third lowest on record, according to Kim Rupert, a fixed income analyst at Action Economics.

"The auction was quite good," she said. "Demand continues to be outstanding."

It was the second of three offerings of U.S. debt this week. On Tuesday the government received strong demand for its sale of $34 billion worth of 3-year notes, but the market still has yet to digest $16 billion worth of 30-year bonds coming on Thursday.

Separately, the Treasury Department reported a $165.04 billion budget deficit during July. Economist surveyed by Briefing.com expected Treasury $180.7 billion.

What analysts are saying: The Fed's decision to reinvest proceeds from maturing assets into Treasurys, suggests the central bank is willing to keep its economic stimulus measures in place for some time to come.

"The decision reinforces the message that monetary policy is set to remain exceptionally accommodative for the foreseeable future," said John Higgins, an analyst at Capital Economics.

Given current economic conditions, the Fed is not expected to hike interest rates until 2012, he said. The central bank cut its benchmark rate to a range near zero percent in December 2008 to help support the economy.

"As a result, we think there is little scope for long-term Treasury yields to fall further," Higgins said.