Treasury yields near all-time lows

August 10, 2011: 4:46 PM ET
The 10-year yield is trading near all-time lows. At 2.14% early Wednesday, the yield is not far from its record low close of 2.13% in December 2008.

At 2.14% early Wednesday, the 10-year Treasury yield is not far from its record low close of 2.13% in December 2008.

NEW YORK (CNNMoney) -- The stomach-churning stock market roller coaster is ramping up demand for Treasuries, even after Standard & Poor's downgraded the United States on Friday.

Combine stock market volatility with the Federal Reserve's gloomy comments about the economy, and it's no surprise then that hunger for low-risk assets remains high.

As a result, the 10-year yield fell to 2.09% Wednesday afternoon, trading near its record low close of 2.06% last seen in December 2008.

A $24 billion auction of 10-year notes also drew solid demand, even at a 2.14% yield -- the lowest 10-year yield at auction, ever on record.

In uncertain times, investors typically flee risky assets such as stocks and pile into perceived safe havens, which -- even after the S&P downgrade -- include U.S. Treasuries.

"We don't think investors care much whether U.S. debt is rated AAA or AA+," Ron Muhlenkamp, president and portfolio manager of the Muhlenkamp Fund, said in a report to investors. "The U.S. Treasury market is still the largest and deepest market in the world, and the likelihood of getting the promised payments remains very high."

Bond yields tanked Tuesday, after the Federal Reserve said it views the economy as "considerably slower" than expected. In line with that gloomy outlook, the central bank said it plans to keep its key interest rate at an "exceptionally low" level until at least mid-2013.

"I have never in my 28 years of doing this seen such a long-term statement from the Federal Reserve," Kevin Giddis, president of Morgan Keegan's fixed income capital markets division, said in a note to investors. "The stage is set for some pretty tough sledding over the next few months and whatever confidence and momentum was created in the last year was pretty much wiped out."

A low federal funds rate is thought to encourage spending by making it cheaper for both consumers and businesses to borrow money.

But the low rate also signaled to investors that the Fed doesn't see inflation significantly affecting the economy for at least two years. That can make even record-low bond yields an attractive option, since at least bonds practically guarantee a return. Stocks -- especially in a low inflation environment -- offer no such guarantee.

In afternoon trading, the 2-year yield fell to 0.19%, slumping under its record-low close of 0.2% last week. The 5-year yield fell to 0.91%, also below it's recent record.

The only Treasury not near a record-low yield is the 30-year bond, which is trading around 3.49%. To top of page

Index Last Change % Change
Dow 16,960.57 -123.23 -0.72%
Nasdaq 4,449.56 -22.54 -0.50%
S&P 500 1,978.34 -9.64 -0.48%
Treasuries 2.47 -0.04 -1.59%
Data as of 7:33am ET
Company Price Change % Change
Facebook Inc 75.19 0.21 0.28%
Apple Inc 97.67 0.64 0.66%
Bank of America Corp... 15.59 -0.03 -0.19%
Ford Motor Co 17.62 -0.22 -1.23%
Applied Materials In... 21.23 -0.52 -2.41%
Data as of Jul 25
Overnight Avg Rate Latest Change Last Week
30 yr fixed4.32%4.27%
15 yr fixed3.29%3.27%
5/1 ARM3.34%3.47%
30 yr refi4.29%4.24%
15 yr refi3.26%3.25%
Rate data provided
by Bankrate.com
View rates in your area
 
Find personalized rates:
Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.