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Bonds prolong suffering
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June 24, 1999: 3:45 p.m. ET
Fed fears, discouraging durable orders push yield to 19-month high
By Staff Writer Robert Scott Martin
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NEW YORK (CNNfn) - The U.S. bond market lost its balance Thursday, falling for the fifth day in a row as investors found the day's economic data little compelling reason to pick up Treasury debt ahead of next week's Federal Reserve meeting.
Shortly after 3 p.m. ET, the bellwether 30-year Treasury bond had fallen 1/4 of a point in price to 87-18/32. The yield, which travels in the opposite direction from the price, stabilized at 6.16 percent after climbing as high as 6.19 percent, a level not seen since November 1997, during the day.
Robert McCool, senior trader at Banc One Capital Markets, said the bond's momentum was "terrible," as "portfolio managers are shaking their heads and can't be talked back into the market. … You have losses at everything you own."
Economic data only heaped gloom on the already groaning bond market.
According to the Commerce Department, durable goods orders rose 1.4 percent in May, surpassing the market's expectation of 1.1 percent growth. The number indicated a continuing upturn in the previously depressed manufacturing sector, which is unflattering for bonds. Manufacturing has lagged the broader economy, braking the general expansion and thereby helping keep one of the bond market's greatest enemies -- inflation - dormant.
Still staring at the Fed
Volume remained light as it has for weeks, exaggerating the apparent effect of the selling. Traders said the market still is focused on the Federal Reserve, which starts a two-day meeting next Tuesday to determine the future of U.S. interest rates.
The Fed is widely expected to raise the key funds rate 25 basis points, or a quarter percentage point, to 5 percent. Still, rumors of a wider rate hike fueled the bond market's underlying gloom Wednesday, pushing the bond yield up to 6.15 percent amid often punishing selling.
As a result, many investors are hoping the Fed will give some clues to its future rate policy when it announces its decision, and are keeping to the sidelines in the meantime.
McCool from Banc One mentioned speculation "in vogue" among bond traders that the Fed could eventually raise rates by as much as 75 basis points over the course of 1999, effectively taking back all three of late 1998's easing moves. However, he said it was still impossible to tell, as "the Fed is going to do what the Fed is going to do, and will not be persuaded by data."
Dollar struggles
The dollar recoiled from the bond market's show of weakness, along with a sympathetic downturn in the U.S. stock market.
The greenback retreated from the 122-yen level once again, slipping to 121.77 amid few fresh signs that the Bank of Japan was still poised to intervene in support of the U.S. currency.
The BOJ has intervened repeatedly to keep the yen from climbing to undesirable levels. An overly strong yen would dent the revenue of Japan's crucial export sector, in turn endangering that nation's still-fragile recovery from economic recession.
However, on Thursday, only "Mister Yen," Vice-Minister of Finance Eisuke Sakakibara, spoke out to remind speculators that Japanese officials are watching the yen. Sakakibara essentially repeated earlier statements that he is paying close attention to currency markets.
The euro, meanwhile, took advantage of the dollar's weakness, surging to $1.0407 from its previous close of $1.0337 as speculators took profits from the greenback's recent rally against the European currency. 
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