US government bonds or T-Bills flew higher today, pushing yields under 5 per cent, to the lowest levels since December 1998, after the US Treasury took markets by surprise by saying it would no longer issue 30-year bonds.
The announcement triggered a scarcity bid in existing paper.
The move was one of the biggest ever in 30-year bond prices. Market players compared the sudden upward jolt to the rally during the 1987 stock market crash.
"We do not need the 30-year bond to meet the government's current financing needs, nor those that we expect to face in the coming years," Mr Peter Fisher, the US Treasury's under secretary for domestic finance, told reporters at the department's quarterly press conference to lay out details of note auctions next week.
Earlier, shorter-dated US government bonds slid after the government said the economy shrank by 0.4 per cent in the third quarter, the most since the last recession in 1991, but far less than expected.
The government's advance estimate of gross domestic product showed a much milder contraction in the economy than the 1 per cent economists had feared, scaling back some investors' hopes for more aggressive Federal Reserve interest rate cuts.