Treasury yields traded at almost record lows as bond market volatility increased on concern the global economic recovery is stalling. Yields on 30-year bonds headed for their biggest weekly drop since the depths of the financial crisis in December 2008. Bonds have rallied since the Federal Reserve pledged this month to keep its target lending rate at virtually zero until at least mid-2013 and Standard & Poor’s lowered the top U.S. credit rating for the first time. “It’s a choppy market,” said Ian Lyngen, a government bond strategist at CRT Capital Group LLC in Stamford, Connecticut. “There’s been a fair amount of price volatility overnight with little information expected today to guide trading direction.” Yields on 10-year notes increased four basis points, or 0.04 percentage point, to 2.11 percent at 9:44 a.m. in New York, according Bloomberg Bond Trader prices. The 2.125 percent security due August 2021 fell 3/8, or $3.75 per $1,000 face amount, to 100 5/32. The 10-year note yields fell earlier today as much as six basis points after sliding to record 1.9735 percent yesterday. Yields on 30-year bonds were little changed at 3.41 percent and headed for a weekly drop of 31 basis points, the most since tumbling 49 basis points in December 2008. Bank of America Merrill Lynch’s MOVE index, which measures price swings in Treasuries based on prices of over-the-counter options maturing in two- to 30 years, rose to 95 yesterday, up from 87.80 on Aug. 17. Fed Speak Benchmark 10-year notes were headed for a fourth weekly gain after reports yesterday showed manufacturing in the Philadelphia region unexpectedly contracted in August by the most in more than two years and consumer prices excluding food and energy rose last month at the slowest pace since April. Cleveland Fed President Sandra Pianalto said today in Columbus, Ohio, that weak economic growth warranted a pledge to hold the target lending at zero to 0.25 percent until at least the middle of 2013. “With my diminished outlook for economic growth, and my outlook for inflation to soon fall back to 2 percent, I was in favor of providing additional support to the recovery at last week’s FOMC meeting,” Pianalto said. “My latest forecast is for the economy to grow at a rate of about 2 percent this year, and about 3 percent in each of the next two years,” she said. “Our economy has to grow at about a 2 1/2 percent clip just to absorb new labor force entrants and to keep the unemployment rate from rising.” To contact the reporter on this story: Susanne Walker in New York at swalker33@bloomberg.net To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net

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