Treasuries fell the most in three weeks on speculation the U.S. government won't
allow Fannie Mae and Freddie Mac to fail, reducing demand for the safest assets. Twoyear
notes led the declines after a person familiar with the matter said a takeover of
one or both of the companies is among the options being considered by White House
officials. The declines pared a weekly gain fueled by concern the mortgage lenders will
need an infusion of capital to weather the worst housing slump since the Great
Depression. The yield on the 10-year note advanced 3 basis points to 3.83 percent. It
has fallen 16 basis points in the past week. Fannie Mae slid 14 percent yesterday,
down 67 percent this year, and Freddie Mac declined 22 percent. The mortgage
lenders would have to post pretax losses and writedowns of about $77 billion before
the U.S. would be compelled to start a rescue, according to estimates by Fox-Pitt
Kelton and Friedman, Billings, Ramsey & Co. The market is relatively unchanged to
.25 improvement this morning.
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