Investors pour into Treasury and muni bonds for safety

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Sell everything else and buy Treasury bonds. And maybe some municipal bonds, too. Or just go to cash.

That’s the overriding market strategy Thursday as investors everywhere seem desperate to quickly lower the risk in their portfolios amid soaring uncertainty about the global economy.


Stocks worldwide are plummeting as investors run for the door. The Dow Jones industrial average was down 331 points, or 2.8%, to 11,564 at about 11:40 a.m. PDT. European stock markets closed down more than 3%, while Brazilian shares are down 5% so far and Canada’s market is off 3.1%.

Commodities also are being hammered, led by crude oil, down $4.99 to $86.94 a barrel.

Even gold is being dumped, a sign that some people are taking profits wherever they have them to raise cash. Gold futures in New York ended down $7.20 at $1,656.20 an ounce after hitting a record $1,681.80 early in the session.

There was no single catalyst for Thursday’s market rout -- just more intense fear that the economic outlook is fading fast and that governments and central banks either can’t or won’t do much about it.

“We’re looking to a double-dip” recession, said David Ader, government bond strategist at CRT Capital Group in Stamford, Conn.

Many economists still say it’s too early to make that call, but looming recession is the loud-and-clear message from the Treasury bond market: Another rush of buying by haven-seeking investors has pushed the two-year T-note yield (charted at left) to a record low of 0.28% from 0.34% on Wednesday.

The 10-year T-note has dived to 2.46% from 2.62%, getting close to last year’s low of 2.39% in October.

Investors also are shoveling cash into tax-free municipal bonds, a trend that began to accelerate on Monday. The Pimco Intermediate Municipal Bond Strategy fund, a exchange-traded muni bond fund, is up 25 cents, or 0.5%, to $52.39 a share. It’s up 1.1% so far this week, while the Dow is down 4.7%.

-- Tom Petruno


What’s behind stocks’ slide?

Money market funds see $103-billion outflow amid debt drama

European Central Bank tries to stop financial crisis from spreading