10 Year Treasury Back below 2% as Stocks Retreat for Fifth Day

(April 10th, 2012) 10-year Treasury yields dropped below 2 percent for the first time in more than a month as the safe-haven appeal of US debt increased amid speculations of worsening European debt crisis.

Treasury bonds continued their forward march as risk off sentiment accelerated and yields on spanish government bonds surged as much as  19 basis points during european trading.  As the US sold $32 billion in three-year notes, foreign central banks remained the biggest buyers, scooping up 40 percent of the day’s auction, pushing yields down to 0.427 percent. The bid-to-cover ratio, a gauge of customer demand that compares total bids received with total securities offered, was 3.36 compared with an average of 3.37 in past 10 sales. Yields on 10-year Treasury bonds dropped seven basis points to 1.98 percent, trading below the 2 percent mark for the first time since March 12.

The iShares Barclays 20 Year Treasury Bond ETF (TLT) jumped 1.27 points, or 1.09 percent, for the day, while the Vanguard Total Bond Market ETF (BND) gained 0.24 points, or 0.29 percent over Monday’s close.

US stocks dropped sharply Tuesday, extending losses for the fifth straight session as fear trade gathered momentum over Europe’s fiscal health. All the three indices closed down by more than 1.5 percent after Spanish and Italian bond yields surged, rekindling memories of the Greek crisis ahead of the first quarter earnings season.

The Dow Jones Industrial Average (DJIA) slumped 213.66 points, or 1.7 percent, to end at 12,715.93, posting its biggest fall this year on Tuesday in a five-day losing streak. Bank of America Corp (BAC) and Caterpillar Inc (CAT) topped the loser’s list with 4.4 percent and 3 percent drops, respectively. PC maker Hewlett Packard Co (HPQ) was the only gainer in the 30-component index, adding 0.6 percent for the day.

The S&P 500 Index (SPX) slipped 23.61 points, or 1.7 percent, to 1358.59, making it the largest single day point and percentage drop for the index since Dec 8, 2011. US stocks took the day’s cue from European markets, which tumbled more than 2 percent Tuesday.

The tech-heavy NASDAQ Composite (COMP) shed 55.86 points, or 1.8 percent, to close at 2991.22, its first close below 3,000 since March 12, making it the biggest point and percentage drop in a single session this year.

Supermarket operator Supervalu’s (SVU) shares rallied more than 15 percent after earnings projection this year topped market expectations.

Oil prices for May delivery dropped $1.32 to close at $101.14 a barrel.

Gold futures for April delivery surged $16.60 to $1,660.50 an ounce.