- The Washington Times - Tuesday, April 14, 2009

NEW YORK (AP) - Treasury prices rose Tuesday as stocks fell and the Federal Reserve bought $7.3 billion in government debt.

The Fed has been buying Treasurys to drive down interest rates and make mortgages and other loans more affordable to average people.

So far, the effort has been successful: the yield on the benchmark 10-year Treasury note has been holding below 3 percent, and the average 30-year fixed mortgage rate has fallen below 5 percent.

The question facing the market, though, is whether the Fed’s purchases will be enough to offset the huge amounts of Treasury issuance in the pipeline. The Treasury has been issuing debt at a record pace to fund its bailout and stimulus efforts.

As stocks dropped Tuesday after an unexpected slump in March retail sales, the benchmark 10-year Treasury note rose 20/32 to 99 21/32. Its yield fell to 2.79 percent from 2.86 percent late Monday.

Investors often flock to government debt when riskier assets like stocks take a tumble.

The 30-year bond rose 1 3/32 to 97 6/32, and its yield fell to 3.66 percent from 3.72 percent.

The two-year note rose 1/32 to 99 31/32 and its yield fell to 0.86 percent from 0.88 percent.

The yield on the three-month Treasury bill was flat at 0.16 percent. The discount rate was 0.17 percent.

The cost of borrowing between banks fell. The London Interbank Offered Rate, or Libor, on three-month loans in dollars edged down by 0.01 percentage points to 1.12 percent. The equivalent rate for three-month loans in euros dropped 0.01 percentage points to a record low of 1.42 percent.

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