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Bonds thank the Fed
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March 30, 1999: 3:38 p.m. ET
Treasury prices surge, dollar struggles after Fed holds steady on interest rates
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NEW YORK (CNNfn) - Treasury prices got a delayed boost from the Federal Reserve's decision not to change U.S. interest rates Tuesday, rallying quietly in relief after the Fed confirmed the widely anticipated news.
By 3:00 p.m. ET, the benchmark 30-year Treasury bond had climbed 26/32 of a point in price to 95-4/32, pushing the yield down to 5.58 percent.
Financial markets had expected the Federal Open Market Committee (FOMC), the Fed's rate policy arm, to keep interest rates unchanged, but investors hoping for a relief rally were gratified to see bonds surge in response.
In particular, traders said the FOMC's decision not to announce a shift in policy toward future interest-rate hikes ahead was good news for bonds. The committee currently maintains a neutral stance on rates, viewing the dangers to the economy as balanced between recession and inflation.
Higher interest rates can render bonds and other fixed-income securities less competitive against other investments.
Activity remained thin and choppy ahead of shortened trading sessions Thursday and Friday, with many investors wary before Friday's release of March employment data.
Pushing the dollar uphill
In currency markets, the dollar remained locked in a narrow struggle against other global currencies as a tepid flight to quality warred against the final vestiges of annual repatriation of Japanese capital and the eternal urge to take profits.
The dollar climbed minimally against the yen to 120.35 yen, gaining a boost from unflattering Japanese labor figures released overnight that showed unemployment for last month at its highest level since the government began to monitor jobless statistics.
Moreover, the flight of Japanese investors back into yen-denominated securities ahead of April 1, the Tokyo fiscal new year, finally limped to an end.
As for the euro, some investors found the European currency a tempting buy a day after it hit record lows, but dollar-buying in a safe-haven bid to escape the uncertain Balkan situation kept the euro under firm pressure. By 3:00 p.m. ET, the European currency slipped to $1.0721 from its previous close of $1.0731.
Traders said euro bulls recoiled from news that the European Union had cut its current-year growth forecast to 2.2 percent from 2.6 percent, spurring speculation that lower European interest rates are on the way. 
-- by staff writer Robert Scott Martin
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