Prices of treasuries have increased based on speculation that losses tied to subprime mortgages may lead the Federal Reserve to cut interest rates a third time this year, Bloomberg reported. The rise pushed yields of the shortest-term securities to the lowest levels since August.

Three-month bill yields tumbled as U.S. stocks fell Thursday. Yields on two-year notes dropped to the lowest rate since 2005. The two-year note’s yield fell 7 basis points, or 0.07 percentage point, to 3.41 percent in early trading, according to bond broker Cantor Fitzgerald LP. It touched 3.39 percent, the lowest since February 2005. The price of the 3 5/8 percent securities due in October 2009 rose 1/8, or $1.25 per $1,000 face amount, to 100 13/32. Yields move inversely to bond prices.

In a sign of banks’ reluctance to lend to one another, the difference between the three-month London Interbank Offered Rate for dollars and the three-month bill’s yield climbed 25 basis points to 174 basis points. Yields of three-month bills dropped 24 basis points to 3.17 percent after touching 3.05 percent, the lowest since August.

“There’s so much money now that’s seeking to get away from risk and toward riskless securities,” said Walter Burke, a fixed-income technical strategist in New York at Merrill Lynch & Co., one of 21 primary dealers that trade directly with the Fed. “People are buying Treasuries like bananas as soon as stocks go down. I’ve never seen such a tight correlation.”