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News & Announcements 4/11/2008 7:47 AM MARKET COMMENTARY U.S. Treasuries rose after General Electric Co. said first-quarter profit fell and cut its 2008 earnings forecast, adding to evidence of a deepening slowdown in the U.S. economy. Futures on the Chicago Board of Trade show traders increased bets that the Federal Reserve will add to its six interest-rate cuts since September to bolster economic growth. An industry report due today is forecast to show U.S. consumer confidence fell to a 16-year low this month. The yield on benchmark two-year notes declined 3 basis points to 1.80 percent as of 7:02 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 1 3/4 percent security due March 2010 rose 2/32, or 63 U.S. cents per $1,000 face amount, 99 29/32. The yield was at 1.985 percent on April 7, the highest since Feb. 28. The yield on 10-year securities slipped 3 basis points to 3.50 percent from yesterday. It was up from 3.47 percent a week ago. Traders see 44 percent odds the Fed will lower its rate for overnight lending between banks by half a percentage point to 1.75 percent on April 30, according to futures on the Chicago Board of Trade. That compares with 36 percent a week ago.Market Commentary U.S. Treasuries rose after Lehman Brothers Holdings Inc. liquidated three investment funds because of `market disruptions,'' reigniting concern that credit-market losses are widening. The gains pushed the two-year note yield close to the lowest level in more than a week as traders raised bets the Federal Reserve will cut its target interest rate a half-point this month to bolster the economy. U.S. stock index futures declined as evidence mounts that more than $230 billion in global losses and asset writedowns at financial firms have pushed the economy into a recession. The yield on the two-year note fell 7 basis points, or 0.07 percentage point, to 1.70 percent as of 6:50 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 1 3/4 percent security due in March 2010 rose 4/32, or $1.25 per $1,000 face amount, to 100 3/32. The yield on 10-year notes declined 3 basis points to 3.46 percent. The Treasury will today sell $6 billion of 10-year inflation-linked notes. Two-year yields will fall to 1.60 percent and 10-year yields will rise to 3.55 percent by the end of the quarter, Barbieri predicted. That compares with weighted-average forecasts of 1.72 percent and 3.46 percent in a Bloomberg survey of 59 respondents.Market Commentary Treasuries advanced, led by two-year notes, as the odds of the Federal Reserve reducing interest rates increased and stocks dropped on concern that credit-market conditions will deteriorate. The gains pushed two-year yields down from near a five-week high as traders raised bets that the Fed will cut its target rate by half a percentage point to 1.75 percent this month. Investors also sought the relative safety of government debt after Standard & Poor's downgraded the three largest U.S. mortgage insurers because losses linked to a housing market slump may extend into next year. Two-year yields fell 3 basis points to 1.85 percent as of 7:38 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 1 3/4 percent security due in March 2010 rose 2/32, or 63 cents per $1,000 face amount, to 99 26/32. The yield on 10-year securities was little changed at 3.56 percent. Yields pared a decline after a report showed mortgage applications rose last week, which helped U.S. stock-index futures recover earlier losses. Two-year yields will decline to 1.7 percent and 10-year yields to 3.5 percent in three months, From predicted. That compares with weighted average forecasts of 1.75 percent and 3.57 percent by June 30 in a Bloomberg survey of 51 respondents. MARKET COMMENTARY Treasuries fell after stocks in Europe and Asia rose and investors grew more confident the Federal Reserve has done enough to avert an economic collapse, damping demand for the safety of fixed-income assets. Two-year notes also extended three weeks of losses on speculation minutes from the March 18 meeting tomorrow will show the Fed is close to ending its biggest series of interest-rate cuts since 1984. Chairman Ben S. Bernanke told the Joint Economic Committee of Congress last week that the Fed's actions `will help to promote growth over time'' and mitigate economic risks. The yield on the benchmark two-year note climbed 7 basis points to 1.89 percent as of 7:12 a.m. in New York, according to bond broker Cantor Fitzgerald LP. The price of the 1 3/4 percent security due in March 2010 fell 4/32, or $1.25 per $1,000 face amount, to 99 24/32. A basis point is 0.01 percentage point. The yield has declined about 1.2 percentage points this year. The yield on the 10-year note rose 6 basis points to 3.52 percent. In March, policy makers cut the target rate for overnight lending between banks by three-quarters of a percentage point to 2.25 percent, a smaller reduction than traders anticipated. Two policy makers dissented in favor of `less aggressive action.'' The Fed reduced its rate 3 percentage points since September and supplied emergency money to banks.

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