New York - Arabstoday
The word of the day in financial markets: Anxious. On Friday, traders did something they rarely do: they sold what are considered to be the world\'s safest short-term investments. Traders typically buy short-term US Treasurys on Friday because they want their money in a safe place in case something happens over the weekend to rattle markets. But this week, they instead bought longer-duration bonds as concerns grew that the federal government may not be able to pay all of its bills next month. Yields on bonds due in one month rose higher than those due in six months. The higher the yield, the higher the implied risk of the bond. Analysts say it\'s a clear sign a short-term default is a growing possibility. Article continues below The sell-off in short-term Treasurys shows that \"the market is very concerned\", said Thomas Tzitzouris, head of fixed income research at Strategas Research Partners. \"It\'s not panic, but we are pre-positioning in case something goes wrong over the weekend.\" Stocks continued a weeklong slide after a dismal report on economic growth added to the anxiety. Major indexes erased some of their early losses on Friday after President Barack Obama said there were many paths to a compromise on raising the debt limit. The Dow Jones industrial average fell 96.87 points, or 0.8 per cent, to close at 12,143.24. The combination of bad economic news and growing worries about a possible debt default was evident in nearly every measure of investor confidence: The Dow Jones industrial average had a sixth straight day of losses, a string that has erased 581.17 points. All ten industry groups in the S and P 500 stock index fell. Gold rose nearly one per cent to $1,631 (Dh5990.50) an ounce (28.34g). A measure of stock market volatility, the VIX, rose six per cent. The cost to protect against a US default within the next year reached a record high. The cost to insure Treasurys for one year jumped 54 per cent this week. Longer-term government bond prices rose as traders saw them as less likely to be affected by short-term positioning in Washington. The yield on the ten-year Treasury bond fell to 2.79 per cent, its lowest level of the year. Bond prices move in the opposite direction of their yields. The Standard and Poor\'s 500 index lost 8.39 points, or 0.6 per cent, to 1,292.28. The Nasdaq composite fell 9.87, or 0.4 per cent, to 2,756.38 points.