Treasuries Rise on Evidence Credit Losses Threatening Economy

Treasuries rose, pushing two-year note yields toward their biggest weekly drop since September 2005, as concern increased that credit market losses are threatening the broader economy.

Two-year note yields fell for a fourth straight day after a 32 percent decline in profit at Bank of America Corp. triggered concern that the mortgage market slowdown may worsen. Futures showed that traders raised the odds to 70 percent that the Federal Reserve will cut borrowing costs a quarter-percentage point at its meeting this month.

Futures traded on the Chicago Board of Trade suggested a 54 percent chance yesterday and a 40 percent chance a week ago that the Fed would cut on Oct. 31. Policy makers reduced the target rate for overnight lending between banks a half-percentage point to 4.75 percent on Sept. 18