Treasury prices rise, yields fall, for a 2nd day

NEW YORK — Exuberance over a strong 30-year bond auction extended into a second day Friday, pushing Treasury prices up and yields down.

If the trend continues, it could mean relief for homeowners worried about the recent upturn in mortgage rates. Treasury yields play a major role in determining interest rates for average borrowers. Most yields ended lower or little changed on the week after spiking to multi-month highs in recent days.

With little news to trade on Friday, traders focused again on Thursday’s auction of 30-year bonds. The auction capped off a rocky week for government debt sales, which were met with varying degrees of demand.

But after Thursday’s strong bond sale, investors were more convinced that the government is not yet running into trouble issuing debt to finance its economic stimulus and industry bailout programs.

Although some foreign central banks have expressed worries about holding U.S. assets due to the weakening dollar, foreign demand for Treasurys has stayed strong.

If evidence emerges that foreign governments truly are veering away U.S. assets, though, bonds could tumble again and send yields climbing.

“If foreign investors’ actions begin to match their rhetoric, the recovery is only pushed back farther in the distance,” wrote Kevin Giddis, managing director of fixed income at Morgan Keegan, in a note.

“Imagine what the auction would have looked like — and the market’s response — if foreign investors had stayed on the sidelines instead.”

The Treasury Department auctioned a total of $65 billion in notes and bonds this week.

In late trading Friday, the 10-year Treasury note rose 18/32 to 94 16/32. Its yield fell to 3.80 percent from 3.86 percent late Thursday. It reached 4.01 percent before Thursday’s 30-year auction, its highest level since last October.

The 30-year bond rose 23/32 to 93 20/32, pushing its yield down to 4.65 percent from 4.69 percent late Thursday.

The two-year note rose 3/32 to 99 7/32, and its yield fell to 1.28 percent from 1.33 percent.

The yield on the three-month Treasury bill slipped to 0.16 percent from 0.17 percent. Its discount rate was 0.17 percent.

Borrowing costs between banks fell to new lows. The British Bankers’ Association said the London Interbank Offered Rate, or Libor, on three-month loans in dollars edged lower by 0.01 percentage point to 0.62 percent.