NEW YORK: US Treasury debt prices rose modestly on Tuesday, with benchmark yields touching the lowest in over three weeks as stocks cut gains and bond investors took S&P's credit outlook warning in stride.
Worries about the euro zone's debt problems bolstered the safe-haven bid for US government debt -- a day after Standard & Poor's rattled the world's major stock markets by revising its outlook for the US credit rating to negative from stable.
The ratings agency said there was a one-in-three chance it would eventually cut the United States' AAA credit rating.
At least one big buyer also gave support to the market on Tuesday as the Federal Reserve bought $6.678 billion of Treasuries maturing January 2014 through February 2015.
"While the S&P report was harmful for equities, at least in the short run, the bond market saw it for what it was -- a warning only, and actually finished the day with higher prices and lower rates," said Kevin Giddis, managing director of fixed income at Morgan Keegan in Memphis, Tennessee.
"That continues today as investors look around, weigh their investment options, then come in and buy dollar- denominated securities," he added.
"The point is: If you have to hang your star on a country, the benefits of hanging that star on the United States tend to be better than the other options," Giddis said.
Data showing US housing starts and permits for future home construction rose more than expected in March had little impact on Treasuries trade, and benchmark yields held not far off the middle of a range outlined since early February.
At midday on Tuesday, the benchmark 10-year US Treasury note was up 5/32 in price to yield 3.36 percent, the lowest since March 24, and down from 3.38 percent late on Monday.
The current 10-year note's yield level is near the center of a range from 3.14 percent to 3.77 percent that has held sway since early February.
On Wall Street, the Dow industrials and the Standard & Poor's 500 Index were up slightly, while the Nasdaq was modestly lower following a mixed bag of earnings reports. On Monday, US stocks fell more than 1 percent on Monday as sovereign debt fears on both sides of the Atlantic hurt the outlook for global economic growth.
The Commerce Department on Tuesday said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units. February's starts were revised up to a 512,000-unit pace from the previously reported rate of 479,000 units. Economists polled by Reuters had forecast housing starts rising to a 520,000-unit rate.
"The level of starts remains at historically low levels, and we foresee a gradual recovery in activity only as an improvement in labor market activity slowly restores demand for housing," said Michael Gapen, economist at Barclays Capital in New York.
The two-year Treasury note was unchanged in price to yield 0.67 percent.
In comparison, the 30-year bond gained 12/32 in price with its yield slipping to 4.44 percent from 4.46 percent late on Monday.
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