The yield on the two-year U.S. Treasury note traded near its lowest since September 2005 as a drop in European and Asian stocks fed demand for the relative safety of government debt.
Yields have fallen by 41 basis points from a week ago as anxiety over $300 billion owed by structured investment vehicles, or SIVs, raised risk aversion, boosting demand for U.S. Treasuries. Stocks fell after the Group of Seven finance ministers and central bankers said the turmoil in the credit markets will slow economic growth. U.S. index futures declined.
``The key question going forward will be whether we see further equity weakness, which could lead bond yields lower,'' said Andreas Meurer, an institutional fixed-income strategist at Deka Investments GmbH in Frankfurt
Here is a chart of the short end of the Treasury curve's prices. Remember the prices and yields move inversely, so yields are dropping. Notice the big rally last week.
