Investors pitch stocks, buy Treasurys amid increasing worries about the consumer, economy

Treasurys surge as investors sell off stocks

NEW YORK — Treasury prices surged and yields fell Monday as investors worried about the economic recovery pulled money out of stocks and commodities and sought safety in government debt.

Long-term Treasury prices rose for a third straight day, pushing yields sharply lower, while major stock indicators dove at least 2 percent, including the Dow Jones industrials, which lost 186 points.

Investors were already on edge at the start of trading Monday, after China’s main market index plunged 5.8 percent overnight on concerns the government would tighten bank lending.

Losses spilled over into European and U.S. markets. In U.S. trading, a disappointing report from home improvement retailer Lowe’s Cos., which said its sales dropped 19 percent in the second quarter, worsened the losses. Investors have become increasingly worried that the economy won’t be able to emerge from recession if consumers don’t increase their spending. Consumer spending accounts for more than two-thirds of U.S. economic activity.

When investors are uncertain about the economy, they tend to store more money in Treasurys, which are seen as a relatively safe investment.

The benchmark 10-year Treasury note rose 27/32 to 101 8/32, driving its yield down to 3.47 percent from 3.57 percent late Friday.

Despite concerns about Americans’ ability to spend freely and help heal the economy, falling yields are a good thing for consumers. The yield on the 10-year note determines interest rates on mortgages and other loans, so a decline in yields keeps borrowing costs low.

“In the mortgage market, yields there continue to be favorable for economic growth,” said Christopher Garman, president of Garman Research. He added that the threat of a spike in yields choking off the economy’s recovery seems to have eased, at least for the time being.

Earlier this year, investors sent long-term Treasury yields climbing, nervous that the steady stream of debt the Treasury Department was issuing to fund the government’s stimulus programs would overwhelm supply. But so far, government debt auctions have been going relatively smoothly. The issuance of $75 billion in debt last week was easily absorbed by the market, and so investors have been breathing easier.

In other trading, the 30-year bond rose 1 21/32 to 102 28/32, and its yield fell to 4.33 percent from 4.42 percent.

The two-year note rose 3/32 to 99 31/32 and its yield fell to 1.02 percent from 1.07 percent.

The yield on the three-month T-bill rose to 0.17 percent from 0.16 percent. Its discount rate was 0.18 percent.

The cost of borrowing between banks fell. The British Bankers’ Association said the rate on three-month loans in dollars — the London Interbank Offered Rate, or Libor — held steady at 0.43 percent.