Treasury debt prices rose sharply on Wednesday, as U.S. stocks shed their earlier gains, with the S&P 500 index turning lower, burnishing government debt's safe-haven allure.
The benchmark 10-year Treasury note's price, which moves inversely to its yield, rose 32/32 for a yield of 3.47 percent, versus 3.60 percent late Tuesday.
The price on two-year Treasury notes was up 3/32 to 100-18/32; the yield fell to 1.70 percent.
The 30-year long bond gained 17/32 to 98-9/32 and the yield slipped to 4.48 percent.
The Fed said Tuesday it would exchange up to $200 billion of Treasury securities to banks for an extended 28-day span for a range of collateral including riskier mortgage-backed securities, which has been the epicenter of the current credit crunch.
"Most market watchers seem to agree that the Fed's actions will do little to directly support home prices and the economy," said William O'Donnell, director of interest-rate strategy with UBS Securities in Stamford, Conn.
Even so, "we think it of vital importance that the Fed has acted to boost confidence in markets that were devoid of the same last week," he said.
There have been nascent signs that the Fed's latest liquidity measure, ahead of its next rate-policy meeting on Tuesday, is instilling investor confidence and increased flows within the financial system, analysts and traders said.
Overnight-lending rates between banks slipped, while global stock markets rose sharply following Wall Street's biggest rally in five years.
Still, doubts over the Fed's latest lending program as a panacea for the U.S. economy have led some traders to move back into safe-haven Treasurys.