Long-term interest rates tumbled further on Tuesday, as government bonds rallied on Federal Reserve purchases of Treasury securities.

The Fed entered the market at 12:30 p.m. to execute a "coupon pass," in which the central bank buys Treasuries to permanently add reserves to the banking system.

The amount and maturities of the issues purchased by the Fed were not disclosed. Typically, the Fed purchases between $3 billion and $4 billion of Treasuries in these transactions.

Kevin Flanagan, money market economist at Dean Witter, Discover & Co., said the coupon pass surprised market participants who had expected the Fed to buy Treasury bills.

Morning Losses Reversed

The purchases caused a reversal from morning losses in the bond market. The initial decline came after the Commerce Department reported it was revising its estimate for growth in second-quarter gross domestic product to 1.8% from 1.6%.

Many economists had been expecting a downward revision because of weaker-than-expected June trade figures.

At 4 p.m., the price of the 30-year Treasury bond was up more than 1/4, lowering the yield to 6.09% from 6.11% on Monday. Intermediate Treasuries were unchanged to down slightly, with the yield on the 10-year notes rising 2 basis points to 5.45%.

The Dow Jones industrial average gained 7.26 points to 3,651.25, just shy of the record of 3,652.09 set on Aug. 25.

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