Interest rates fall after SEC accuses Goldman Sachs of civil fraud tied to mortgage securities

Interest rates tumble after gov’t charges Goldman

NEW YORK — Interest rates tumbled in the bond market Friday after the government charged Goldman Sachs & Co. with fraud related to mortgage investments.

The Securities and Exchange Commission charged in a civil complaint Friday that Goldman didn’t disclose that a client helped to create and then place bets against subprime mortgage securities that Goldman sold to investors.

Concern over the reach of the ramifications on Goldman and other banks sent Treasury prices higher and pushed down yields. In the stock market, the Dow Jones industrial average fell 126 points.

The yield on the benchmark 10-year Treasury note maturing in February 2020 fell to 3.77 percent in late trading from 3.84 percent Thursday. Its price rose 18/32 to 98 26/32. The yield on the 10-year note is linked to rates on mortgages and other consumer loans.

The 10-year yield reached 4 percent earlier this month after government debt auctions added more supply to the market and after stronger economic reports signaled a recovery is occurring.

The rise in Treasury prices came after news of the SEC’s civil charges against Goldman came out and traders worried that other major banks may also come under scrutiny for their roles in trading securities backed by subprime mortgages. Goldman Sachs rejected the charges and said it plans to fight them.

In other trading, the yield on the two-year note that matures in March 2012 fell to 0.96 percent from 1.02 percent. Its price rose 4/32 to 100 3/32.

The yield on 30-year bond that matures in February 2040 fell to 4.67 percent from 4.72 percent, while its price climbed 24/32 to 99 7/32.

The yield on the three-month T-bill that matures July 15 was flat at 0.15 percent. Its discount rate was 0.16 percent.