BOND REPORT: Treasurys End Higher As Stocks Hit Fresh 12-year Lows

By Nick Godt

Treasurys rose on Tuesday, while yields fell, after stocks made fresh 12- year lows after weak housing and auto sales data, along with a bleak assessment of the economy from Federal Reserve Chairman Ben Bernanke.

Speaking on Capitol Hill, Bernanke said that the most recent economic data, including on the labor market, showed little sign of improvement in recent weeks.

Reversing morning gains, government bonds returned to positive ground, sending their yields lower. Yields on benchmark 10-year Treasury notes (UST10Y) fell fractionally to 2.879%. Yields on two-year notes (UST2YR) were flat at 0.883%, while those on 30-year bonds (UST30Y) fell 1 basis points to 3.603%.

Bond prices move inversely to their yields.

Treasurys rose sharply on Monday as stocks tumbled to 12-year lows amid fresh concerns over the health of financial firms such AIG (AIG).

After rising firmly in morning trade Tuesday, stocks turned negative. The Dow Jones Industrial Average finished down 37 points at 6,726. The S&P 500 index dipped 4 points to 696, marking its first close below 700 since Oct. 28, 1996. the Nasdaq Composite (RIXF) lost 1 point to 1,321.

General Motors Corp. (GM), Ford Motor Co. (F) and Chrysler LLC said U.S. vehicle sales fell at least 44% in February.

Investors also failed to react positively to remarks from Treasury Secretary Timothy Geithner who spoke on the budget and didn't provide additional details on how the government intends to deal with the toxic assets that still plague banks' balance sheets.