Treasurys Gain on Bank Warnings, Weak Stocks

U.S. Treasury debt prices rose Tuesday as renewed credit worries and a weaker stock market revived investors' appetite for safe-haven government debt.

The credit cauldron was stirred by a worse-than-expected second-quarter loss at Swiss bank UBS AG . Also, JPMorgan Chase said it had incurred losses of about $1.5 billion since the start of July, hurt by turmoil in the credit and mortgage markets and by wider credit spreads and lower liquidity.

A weaker open on Wall Street also enhanced investors' preference for Treasurys, whose prices have fallen over the last two trading sessions as stocks rallied.

"Stocks are doing worse, led by financial stocks," said Andrew Brenner, senior vice president at MFGlobal in New York. "People are also concerned about the credit situation."

Brenner said the market would closely parse the results of Monday's Treasury Auction Facility (TAF) auction, at which $25 billion of loans were auctioned at 2.754 percent, with a bid-to-cover ratio of 2.19.

"A lot of interest in that facility would indicate that the availability of financing is still a problem," Brenner said.

The benchmark 10-year Treasury note's price, which moves inversely to its yield, was up 12/32, its yield falling to 3.95 percent from 4 percent Monday.

Thirty-year Treasury bonds rose 21/32 after falling more than a full point in price on Monday. Their yields eased to 4.56 percent from 4.61 percent late Monday.

Two-year Treasury note prices rose 3/32, reversing the previous day's loss. Their yields eased to 2.50 percent from 2.56 percent on Monday.

An unexpected narrowing in the June U.S. trade gap had no discernible impact on Treasurys prices.

The June trade numbers were "slightly favorable for second-quarter GDP. Imports will be a little less of a drag on economic growth than appeared earlier, but (they) still reflect the overall weakness in the U.S. economy," said Gary Thayer, senior economist at Wachovia Securities in St. Louis.