Two-Year treasuries up, ten-year notes drop on Fed rate cut

Two-year treasury notes rose as and ten-year securities fell on Tuesday following the U.S. Federal Reserve's announcement that it would cut it's benchmark interest rates to prevent the U.S. economy from slowing too much even as some signs of inflation remain.

The Fed cut its federal funds rate by half a point to 4.75 percent, the first cut in more than four years amid tight credit conditions in financial markets. Equities investors pushed stocks higher as major indexes rose on the news.

The relaxed monetary policy in the face of some inflation signs hurt longer-term 10-year notes fell 12/32 to offer a yield of 4.52 percent, higher than their 4.47 percent close on Monday.

Shorter term two-year treasuries benefited, however, rising 4/32 to a yield of 4.01 percent.