NEW YORK — Treasurys rose Tuesday, pushing yields on 10- and two-year notes to all-time lows, after Federal Reserve officials promised to keep benchmark interest rates at record lows at least through mid-2013 in a bid to revive economic growth.
U.S. debt rallied as central-bank policymakers said economic growth is “considerably slower.” The Treasury’s sale of $32 billion in three-year notes drew stronger-than-average demand in the first note sale since Standard & Poor’s cut the U.S. debt rating Friday.
“It’s pretty amazing that the Fed will be exceptionally low until 2013,” said Jason Rogan, director of U.S. government trading at Guggenheim Partners, a New York-based brokerage for institutional investors. “They are telling you that we are in a stage of Japanese-like growth. The front end is rallying like crazy.”
Yields on 10-year notes fell five basis points, or 0.05 percentage points, to 2.27 percent, according to Bloomberg Bond Trader prices. The 3.125 percent securities maturing in May 2021 rose AC/cb, or $4.06 per $1,000 face amount, to 107AC/cb. The yield touched 2.0346 percent, lower than the previous record of 2.0352 percent in December 2008.
Note and bond yields plunged after the Fed’s statement was issued at 2:18 p.m. EDT, before paring the declines later in the afternoon.
Yields on two-year notes fell six basis points to 0.20 percent. The yield touched 0.1568 percent, lower than the previous record of 0.2283 percent Monday.
Thirty-year bond yields fell one basis point to 3.646 percent.
“The market wanted the Fed to acknowledge the weakened outlook, and they did,” said Priya Misra, head of U.S. rates strategy at Bank of America Merrill Lynch, one of the 20 primary dealers that trade with the Fed. “The explicit commitment to mid-2013 by the Fed has reaffirmed price action.”
