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U.S. Notes Fall as Government Prepares Plan to Invest in Banks
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Oct. 14 (Bloomberg) -- Treasuries fell the most in two weeks as the government prepared to announce a plan to acquire stakes in major banks, giving investors confidence to buy stocks and corporate bonds. Two-year yields approached the highest level this month as Asian stocks gained, following the biggest U.S. stock rally in seven decades. The U.S. plans to invest in Citigroup Inc., Wells Fargo & Co., JPMorgan Chase & Co., Bank of America Corp., Goldman Sachs Group Inc., Morgan Stanley, State Street Corp., and Bank of New York Mellon Corp., according to people briefed on the matter.

Two-year note yields rose 30 basis points to 1.94 percent as of 9:59 a.m. in Tokyo, according to BGCantor Market Data. The price of the 2 percent security due September 2010 fell 18/32, or $5.63 per $1,000 face amount, to 100 3/32. The MSCI Asia Pacific Index of regional shares rallied 6.1 percent. Ten-year yields climbed 15 basis points to 4.03 percent, pushing above 4 percent for the first time since August.

The difference between two- and 10-year yields shrank to 2.1 percentage points from 2.38 percentage points yesterday.

The Bank of Japan added 1 trillion yen ($9.71 billion) to the financial system as central banks around the world boost liquidity to help counter a worsening global financial crisis.

Interest-rate derivatives imply banks are becoming more willing to lend. The difference between the rate banks charge for three-month dollar loans relative to the overnight indexed swap rate, the so-called Libor-OIS spread, narrowed to 3.54 percentage points from 3.66 percentage points last week.
Posted by: Steve White 2008-10-14
http://www.rantburg.com/poparticle.php?ID=252640