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Asian ills send bonds soaring
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August 11, 1998: 9:27 a.m. ET
Stock market slump, dip in yen send U.S. Treasury yield to new lows
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NEW YORK (CNNfn) - U.S. Treasurys got a sharp kick upward Tuesday from the two-footed impact of a huge stock sell-off worldwide and the Japanese yen's continuing woes.
The yield on the 30-year benchmark Treasury issue fell to a record low, below the 5.61 percent mark set in mid-June.
The long bond soared 28/32 in price in early U.S. trading, with the yield falling to 5.56 percent.
The bond's gains could provide an upbeat backdrop for the U.S. Treasury Department's quarterly debt refunding. A total of $16 billion of five-year notes is set to be auctioned Tuesday.
Foreign exchange traders have been bracing for a new dip in the Japanese yen, and early signs emerged overnight Tuesday.
The dollar rose to an eight-year high against the Japanese currency, reaching 147.63 yen. The dollar recently was up 1.13 yen at 147.36 to the dollar.
A weaker yen means cheaper imports for American consumers and lowers inflation pressures.
At the same time, an injured yen drives investors into dollar-denominated assets such as bonds. And because stock market weakness globally was set to affect Wall Street as well, the main remaining "safe haven" is U.S. Treasurys.
Japanese officials scrambled to talk up the yen, whose dip was the primary spark to yet another stock sell-off across Asia.
Japan's Nikkei index dropped 1.4 percent and Hong Kong's Hang Seng fell 3.62 percent.
Japanese Finance Minister Kiichi Miyazawa said Japan might step into the currency market to prop up the yen in the event of "disruptive factors."
The Hong Kong dollar, which has been pegged to the U.S. dollar for 15 years, came under new speculative pressure and led to concerns that China may devalue its yuan.
"The market got pretty nervous when it saw the dollar-yen hit 147," said a dealer in Hong Kong.
Meanwhile, Russia took a pounding in the wake of the Asian ills and further fears of a ruble devaluation.
The German mark drifted slightly in the wake of that news, down about a half a pfennig at 1.7820 marks to the dollar.
Germany is a key Russian creditor. 
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