Treasurys advance after Fed statement

Prices rise as investors respond to the central bank's latest assessment of the economy and digest a sale of $40 billion in 5-year notes.

EMAIL  |   PRINT  |   SHARE  |   RSS
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all RSS FEEDS (close)
By Ben Rooney, staff reporter

How has the Federal Reserve handled the economic crisis?
  • Well
  • Has had little impact
  • Poorly
Fighting off the bear
One year after the collapse of Lehman Brothers, these readers are repairing their portfolios. Here's what they're doing.

NEW YORK ( -- Treasurys mostly rose Wednesday after the Federal Reserve announced plans to hold interest rates steady and the market absorbed an auction of $40 billion in U.S. debt.

The Fed said in a policy statement that it sees signs that economic activity has "picked up" but warned that high unemployment could dampen the recovery.

The central bank said it would "gradually slow" its purchases of $1.25 trillion in mortgage-backed securities and $200 billion worth of federal agency debt by extending the program by three months.

The program, which was originally expected to finish at the end of the year, will be completed in the first quarter of 2010, the Fed said. The agency also reiterated its plan to wind down a plan to buy $300 billion worth of Treasurys in October.

As expected, the Fed left its benchmark interest rate unchanged near zero percent and stated that rates will remain at "exceptionally low levels" for an "extended period" of time.

Given the challenges facing the economy, the Fed said it anticipates inflation to remain "subdued for some time."

"The statement was pretty much as expected," said Steve Van Order, a fixed income strategist at Calvert Funds, adding that the market is now gearing up for another big auction on Thursday.

Earlier Wednesday, the government sold $40 billion worth of 5-year notes in the second of three auctions this week that total a record $112 billion.

The U.S. received nearly $96 billion worth of bids at Wednesday's auction -- 2.4 times the amount that was up for sale. That brought the bid-to-cover ratio down from 2.51 in August, when 5-year notes were last auctioned. Indirect bidders, including foreign central banks, bought 44.5% of the notes sold on Wednesday.

On Tuesday, the government drew strong demand at its sale of $43 billion in 2-year notes. On Thursday, it will auction $29 billion worth of 7-year notes.

Bond prices: The benchmark 10-year note was up 7/32 to 101 22/32, and its yield fell to 3.41% from 3.45% late Tuesday. Bond prices and yields move in opposite directions.

The expiring 5-year note rose 7/32 to 100 and its yield fell to 2.37%. At Wednesday's auction, the new 5-year note that will be quoted starting Thursday was priced at 99-18/32 and its median yield was 2.39%.

The 30-year bond rose 1/32 to 105-5/32, and its yield eased to 4.19%.

The 2-year note fell less than 1/32 in price to 99-2/32. Its yield rose to 1% from a median yield of 0.99% at Tuesday's auction.

The yield on the 3-month bill 1%. To top of page

They're hiring!These Fortune 100 employers have at least 350 openings each. What are they looking for in a new hire? More
If the Fortune 500 were a country...It would be the world's second-biggest economy. See how big companies' sales stack up against GDP over the past decade. More
Sponsored By:
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.