The Wall Street Journal-20080213-Treasurys Drop Amid Talk Of Bond-Insurer Lifeline

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Treasurys Drop Amid Talk Of Bond-Insurer Lifeline

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Rallying stocks and a possible lifeline for beleaguered bond insurers sent Treasury bond prices lower yesterday.

The benchmark 10-year Treasury note shed 16/32 point, or $5.00 for every $1,000 invested, to yield 3.679%. That's up from Monday's yield of 3.618%, as yields rise when prices fall.

The market's losses were slow and steady and were mostly complete by midmorning as investors took heart from Warren Buffett's offer to reinsure some $800 billion worth of municipal bonds.

Treasurys were already under selling pressure overnight after Citigroup Inc., Bank of America Corp. and other major U.S. banks said they plan to take measures to ease mortgage foreclosures.

"This is good news and the market took it as a relief. So you are seeing bonds reacted to that by selling off," said Nicolas Beckmann, co-head of U.S. interest-rates trading at BNP Paribas Securities Corp. "But I think it is overreaction. The underlying problem [for bond insurers] is not muni bonds, it is structured financial products."

Also lifting market sentiment was a survey released by the Federal Reserve Bank of Philadelphia that said the economy is likely to escape a recession. San Francisco Federal Reserve Bank President Janet Yellen also said the central bank's rate cuts will boost growth over time.

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AUCTION RESULTS

Here are the results of the Treasury auction of four-week bills. All bids

are awarded at a single price at the market-clearing yield. Rates are

determined by the difference between that price and the face value.

Applications ....................................... $69,168,908,000

Accepted bids ...................................... $27,000,029,000

Accepted noncompetitively .......................... $356,463,000

Foreign noncompetitively ........................... $50,000,000

Auction price (rate) ............................... 99.805556 (2.5%)

Coupon equivalent .................................. 2.547%

Bids at market-clearing yld accepted ............... 94.05%

Cusip number ....................................... 912795D32

The bills are dated Feb. 14 and mature March 13.