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Treasurys edge higher amid Fannie, Freddie worries


ASSOCIATED PRESS

3:06 p.m. August 27, 2008

NEW YORK – Treasury bonds rebounded Wednesday to finish slightly higher amid uncertainty over whether troubled mortgage financiers Fannie Mae and Freddie Mac would need a government bailout.

Investors grew concerned about the potential for further financial losses and the need for federal help for the government-sponsored companies when trading in Fannie's stock was halted because of pending news. The company disclosed several executive changes, which analysts said did not affect bond trading. But there were still concerns in the market before and after the announcement that a failure of the companies could have a wide effect on the economy and financial markets; Fannie and Freddie hold or back roughly half of U.S. mortgage debt.

Some analysts questioned whether a bailout of the government-chartered companies was as imminent as some investors believed. But lingering concerns about both companies led some investors to seek the comfort of safe-haven investments like government debt.

The fixed-income market had traded lower earlier in the session after the government reported an unexpected rise in July durable goods orders, with investors moving money into the stock market.

In late trading, the 10-year Treasury note rose 4/32 to 101 30/32. Its yield fell to 3.77 percent from 3.79 percent late Tuesday, according to BGCantor Market Data. Yields move in the opposite direction from prices.

The 30-year long bond rose 1/32 to 101 28/32. Its yield fell to 4.39 percent from 4.40 percent Tuesday.

The 2-year note rose after the government completed an auction of $32 billion of the securities. The price rose 3/32 to 100 28/32, and yielded 2.29 percent compared with 2.33 percent late Tuesday.

The 3-month Treasury bill's yield was 1.65 compared with 1.70 percent Tuesday, and its discount rate was 1.63 percent compared with 1.68 percent.

The Treasury Department plans to sell $22 billion in five-year notes Thursday.


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