November 24, 2008 / 2:24 PM / 11 years ago

TREASURIES-Yields still near historic lows after Citi bailout

* Yields hold near historic lows

* Citigroup rescue may offer stock investors some relief

* Bailout sharpens focus on banking sector troubles

* Market readies to absorb supply from note auction

* Eyes on President-elect Obama’s economic team

NEW YORK, Nov 24 (Reuters) - U.S. Treasury debt yields remained near historic lows on Monday even after a government bailout for Citigroup (C.N), one of the world’s biggest banks, as investors’ fears persisted about the unfolding credit crisis and global economic downturn.

Bond market participants were also awaiting President-elect Barack Obama’s scheduled mid-morning press conference to present his economic policy team.

U.S. stocks stormed higher in a late day rally on Friday, pushing safe-haven government bond prices down, on news reports that Timothy Geithner, president of the Federal Reserve Bank of New York, would be nominated as U.S. Treasury secretary.

But that relief rally for equities at the anticipated leadership changes might prove short lived, as investor anxiety persists about the unfolding banking crisis and recession, restoring the flight-to-safety bid for government bonds.

The benchmark 10-year Treasury note’s price, which moves inversely to its yield, rose 3/32 for a yield of 3.23 percent US10YT=RR, versus 3.24 percent late Friday and above 2.99 percent hit on Thursday, the lowest in five decades.

Even the prospect of this week’s record supply of two- and five-year notes, via a $36 billion auction of two-year notes later on Monday, then $26 billion of five-year securities on Tuesday, hardly pressured short maturities’ prices.

The 2-year Treasury note’s price was unchanged for a yield of 1.13 percent US2YT=RR. The U.S. 2-year yield hit a record low on Thursday around 0.96 percent.

“I think there will remain a bid for Treasuries in the front end,” said Doug Bender, managing director with McQueen, Ball & Associates in Bethlehem, Pennsylvania.

“People are looking at the ramifications of the credit crisis on the economy on a global basis,” Bender said. “These are historic times and yields are where they are, near all-time lows, because there is a tremendous flight-to-quality bid in this market,” Bender said.

“We have a bailout going on of one of the largest financial institutions in the world. In general, there has been a breakdown in confidence,” he said. “The leaders, both financial and political, have to restore confidence for investors.”

Citigroup was promised $20 billion of new capital from the government and a guarantee covering $306 billion of assets.

With U.S. financial markets closed on Thursday for the Thanksgiving holiday, this week’s economic data will be compressed into three days of releases, with figures on October existing home sales and durable goods orders likely to draw the most interest.

The 30-year Treasury bond slipped 7/32 in price for a yield of 3.70 percent US30YT=RR, versus 3.69 percent late Friday. (Reporting by John Parry; Editing by James Dalgleish)

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