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Thursday, November 22, 2007

Treasury rally will lower mortgages, hurt some portfolios

November 22 2007
A plunge in a closely watched Treasury yield Wednesday spells relief for some borrowers who want to buy homes and big-ticket items like cars, but is a threat to retirement portfolios and the broader economy. A vigorous Treasury rally sent the benchmark yield on the 10-year Treasury note below 4% early Wednesday for the first time since September 2005. Heavy losses on global stock exchanges, alongside escalating credit fears and a surge in oil prices above the $99 a barrel level, caused nervous investors to clamor for Treasurys, which carry a government guarantee. Mortgages and consumer loans for items like autos and appliances often are tied to the yield on the 2-year note, which Wednesday dropped below 3% for the first time in almost three years.

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