Treasuries rose, with two-year notes headed for the biggest weekly gain since
February, as stocks fell and a record loss by American International Group Inc.
reignited concern about the seizure in credit markets. Futures contracts on the
Chicago Board of Trade show the Fed will probably keep its target interest rate at 2
percent through the rest of the year. The odds of an increase fell to 28 percent from 36
yesterday. The two-year note yield fell 3 basis points to 2.19 percent as of 6:47 a.m. in
New York, according to bond broker BGCantor Market Data. The price of the 2 1/8
percent security maturing in April 2010 rose 2/32, or 63 U.S. cents per $1,000 face
amount, to 99 28/32. The yield has declined 26 basis points this week, the most since
February. It will drop to 2 percent in the coming month, Stamenkovic predicted. Tenyear
yields fell 4 basis points to 3.74 percent, after falling 10 basis points yesterday,
the most in a week. A basis point is 0.01 percentage point. The market is .250 better in
discount this morning.