NEW YORK (AP) - Treasury prices rallied Thursday as news of the assassination of Pakistani opposition leader Benazir Bhutto startled markets and sparked demand for safe assets like government-backed bonds.
Bhutto, a former prime minister, was killed just after giving a speech in a suicide attack that also took the lives of at least 20 other people. Her death threw the campaign for critical Jan. 8 parliamentary elections into chaos and stoked fears of mass protests and violence across the nuclear-armed nation, an important U.S. ally in the war on terrorism.
The news rocked U.S. markets, leading to selling on Wall Street.
'Treasurys are rallying alongside weaker stocks,' said Shubha Jayaram, a Treasury analyst at IDEAGlobal.com. 'Certainly we are seeing a flight to quality as this throws Pakistan into chaos. The elections scheduled for January are up in the air. This shows instability in the region.'
The benchmark 10-year Treasury note rose 18/32 to close at 100 13/32 with a yield of 4.20 percent, down from 4.29 percent on Wednesday. Prices and yields move in opposite directions.
The 30-year long bond gained 26/32 to 106 8/32 with a yield of 4.61 percent, down from 4.69 percent.
The 2-year note advanced 3/32 to 100 16/32 with a yield of 3.23 percent, down from 3.31 percent.
After hours trade changed some yields from their 3:00 p.m. Eastern time official closing levels. At 5:30 p.m. EST, the 10-year yield remained at 4.20 percent, while the 30-year yield was at 4.62 percent, and the 2-year yield was at 3.21 percent.
The yield on the 3-month bill was 3.12 percent, down from 3.32 percent. The discount rate was 3.04, down from 3.28.
The intensified demand for safe assets helped spur heavy bidding at an afternoon auction of $13 billion in new 5-year notes. More bids were offered than at the last auction of 5-year notes in November. In addition, there was a higher percentage of indirect bidders, a carefully watched category that includes foreign central banks.
'Treasury's 5-year note auction improved on November's results, thanks to the demand for safety following Bhutto's killing,' said Action Economics.
Investor appetite for safe instruments also was fueled by reports indicating that businesses are becoming more cautious about spending and that the number of people seeking unemployment benefits is increasing. Signs of economic weakness also cause investors to load up on safe instruments.
The Commerce Department reported that monthly orders for durable goods edged up 0.1 percent in November. Analysts polled by Thomson/IFR Market had expected a larger 3 percent gain. Excluding the volatile transportation orders category, durable-goods orders fell by 0.7 percent for the month.
Separately, the Labor Department said initial jobless claims nudged up in the most recent weekly data, while continuing claims reached the highest level seen in more than two years.
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