The Nation

Oct 26, 2010 1:47 PM by Greg Boyce

Two-year bonds at record low rate

NEW YORK (AP) - Investors are lending money to the government at a record low rate for two-year debt.

The Treasury sold $35 billion in two-year notes on Tuesday at 0.40 percent, the lowest yield ever for an auction of two-year notes.  Last month, the Treasury auctioned the notes at 0.44 percent, the previous record low rate.

The two-year auction comes a day after the Treasury sold inflation-protected bonds at a negative yield, a first since the government introduced the bonds in 1997.
Treasury yields have sunk to historic lows as traders expect the Federal Reserve will launch a new round of bond buying after its meeting next month. TIPS buyers are betting the Fed's action will stoke inflation, turning the bonds' negative yields into positive gains.

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