Two-Year Treasuries Rise as Falling Stocks Stoke Risk Aversion

U.S. two-year Treasury notes rose, pushing yields to near the lowest in 2 1/2 years, as a decline in Asian and European shares prompted investors to seek the safety of government debt.

The spread, or difference in yields, between two- and 10- year debt widened to near the most since March 2005 as investors bought safer, shorter-dated securities. Barclays Plc, the U.K.'s third-biggest bank, today said it wrote down about 1.3 billion pounds ($2.7 billion) on securities tied to the U.S. subprime- mortgage collapse, reducing appetite for riskier investments.

``We're seeing a reaction to the fall in stocks,'' said Glenn Marci, a fixed-income strategist in Frankfurt at DZ Bank AG, Germany's biggest cooperative lender. ``There's still great uncertainty about the economy, and that's supporting Treasuries.''

The yield on the two-year note fell 4 basis points, or 0.04 percentage point, to 3.47 percent at 7:47 a.m. in New York, according to bond broker Cantor Fitzgerald LP. It reached 3.38 percent on Nov. 13, the lowest since February 2005.

The price of the 3 5/8 percent security due in October 2009 gained 2/32, or 63 cents per $1,000 face amount, to 100 9/32.

Ten-year yields slipped 2 basis points to 4.24 percent. Yields move inversely to bond prices.

Stock markets across Europe and Asia fell. The U.K.'s FTSE 100 Index snapped a three-day rally to drop 1 percent, while the DAX Index in Germany slid for the third day this week, declining 1.1 percent. U.S. stock-index futures were also lower after the Standard & Poor's 500 Index fell 0.7 percent yesterday.
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