SP 500 daily March 3

Treasuries fell, with the difference between the 10-year note's yield and the two-year rate increasing to near the widest in more than 3 1/2 years, on bets Federal Reserve interest-rate cuts will stoke inflation. Bonds slumped as oil traded above $100 a barrel and gold futures rose to a record high. Treasuries pared earlier gains as speculation eased that policy makers are considering a cut in the discount rate at a meeting of the board of governors today.

A posting on the Fed's Web site said that a board meeting today would include the ``review and determination by the board of governors of the advance and discount rates to be charged by Federal Reserve banks.''

The Fed's first interest-rate response to the August credit collapse was to lower the discount rate, rather than the benchmark federal funds rate target. The market is hyper-sensitive to anything the Fed does.

Treasuries

Treasuries rose, pushing two-year yields to the lowest level since April 2004, as mounting losses in credit markets and the slowing U.S. economy drove investors to the safety of government debt. More than $181 billion in losses linked to subprime mortgage loans have made banks around the world less willing to lend to companies and individuals. The losses, triggered by the worst housing recession in a quarter-century, have prompted the Fed to cut rates to 3 percent from 5.25 percent since September.

Fed Chairman Ben S. Bernanke told the Senate Banking Committee yesterday it's ``fair'' to say the Fed has a tougher time responding to the current slowdown compared with the recession of 2001. He said some small banks exposed to real estate may fail, fueling bets policy makers will increase the pace of interest-rate cuts.