US Treasury prices jump

US Treasury debt prices rallied on Tuesday as tumbling stocks and deepening concerns about the global banking system and economy convinced investors to buy more safe-haven US government debt. Bond analysts said worries about European banks, weak economic data from Japan, and a drop of about 4 percent in US stocks fuelled the Treasury market rally.
Concerns about Europe's weakening economy were underscored after Moody's Investors Service threatened to downgrade European banks with heavy exposure to Eastern Europe. The US 30-year Treasury bond climbed more than three full points and the 10-year Treasury note rose more than two points as big stock losses drove investors into less risky assets.
"More concerns about the health of the financial system caused flows out of stocks and into safe-haven bonds," said Derrick Wulf, vice president and portfolio manager, with $5 billion in assets under management at Dwight Asset Management Company in Burlington, Vermont. The 10-year note yield, which moves inversely to its price, fell to 2.64 percent, the lowest since late January but up from a five decade low of 2.04 percent on December 18.
The S&P 500 index dropped below the 800 level for the first time since the bear market low of November 21, with financial and energy stocks leading the way down. Weak US manufacturing data accelerated the drop in share prices. "The economy is still weakening and the economic numbers do not signal that a bottom is near," said James Barnes, fixed-income portfolio manager at National Penn Investors Trust Company in Reading, Pennsylvania.
"The issues are the same, but perceptions about how long it will take to resolve those issues keep changing and that moves the market," Barnes said. "There aren't any quick fixes." The Obama administration proceeded apace, however, with plans to repair the economy and financial system.
On Tuesday, US President Barack Obama signed a $787 billion economic stimulus bill into law as global markets plunged on fears that the recession would deepen despite government action in many countries. On Wednesday, Obama is expected to set a strategy to stem home foreclosures and address the housing crisis, The 2-year Treasury note's price rose 7/32, its yield easing to 0.86 percent from 0.97 percent late Friday.
The 30-year Treasury bond rose more than three points in price, its yield easing to 3.47 percent from 3.68 percent late Friday. Treasuries extended gains after the New York Federal Reserve's Empire State factory index, which dates back to July 2001, fell to a record low in February with new orders and employment falling sharply.