Treasury Yields Drop to Record Lows as Euro Storm Hits the Markets

(Bond Market Wrapup for May 30th, 2012)  Treasuries soared to push yields down to record lows as investors desperately sought safe haven assets. Spanish and Italian bond yields soared as the ECB’s refusal to bail out Spain’s Bankia raised more questions about the country’s ability to fund bank recapitalizations that may cost Madrid €100 billion.

Treasury Bonds pared previous losses as yields on the benchmark 10-year note broke its previous record of 1.6714 percent set on Sep 23 to touch an all-time low of 1.6085 percent. Today’s decline of 13 basis points to 1.61 percent at 4.27 pm New York time is the lowest in Fed figures since 1953. Yields on 30-year bonds declined 15 basis points to end at 2.70 percent, the lowest since Oct.

10 Year Treasury Note Yield – 1 Month Chart

Bond Funds were also up on the day with the iShares Barclays 20 Year Treasury Bond ETF (TLT) jumping $3.12, or 2.54 percent, to close at $126.14, while the Vanguard Total Bond Market ETF (BND) gained 32 cents, or 0.38 percent to close at $84.35.

TLT 1 Month Chart

US stocks closed lower Wednesday after reports of the European Central Bank rejecting Spain’s recently nationalized Bankia group’s bailout plea hit the market. In a statement issued Wednesday, the ECB said it was not consulted about the bank’s bailout requirements and can’t recapitalize Spain’s fourth largest bank.

The Dow Jones Industrial Average (DJIA) slipped 160.83 points, or 1.3 percent, to 12,419.86 after adding more than one percent yesterday on hopes of global stimulus and Greek settlement. All but one of the blue-chip’s 30 components ended in the red. Technology stock Intel gained slightly while stocks linked to economically sensitive industries were the hardest hit. Both Chevron (CVX) and Bank of America (BAC) lost more than 3 percent while Alcoa (AA) and caterpillar (CAT) were also hit hard, losing more than two percent for the day.

Dow Jones Industrial Average 1 Month Chart

The S&P 500 Index (SPX) tumbled 19.10 points, or 1.4 percent, to 1313.32 with financials and energy falling the hardest. All sectors ended in the red for the day.

The NASDAQ Composite Index (COMP) shed 33.63 points, or 1.2 percent, to settle at 2837.36.

For every stock gaining, about six stocks declined on the NYSE.

Oil prices for July delivery slipped $2.94 to close at $87.82 a barrel.

Gold futures for June delivery rose $14.70 to end at $1,563.40 an ounce.