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Bond sell-off resumes
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October 25, 1999: 9:20 a.m. ET
Treasurys fall on concerns over expected strong GDP, ECI reports
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NEW YORK (CNNfn) - Treasury bonds fell more than half a point Monday, pushing yields to two-year highs, on fears that two closely watched economic indicators later this week will show a surge in inflation.
"The credit market right now is bracing for some bad news," said John Lonski, senior economist at Moody's Investors Service. "Yields should continue heading higher until the U.S. economy slackens appreciably."
Just before 9:10 a.m. ET, the price of the benchmark 30-year Treasury bond fell 20/32 to 96-12/32. Its yield, which moves inversely to the price, rose to a two-year high of 6.39 percent from 6.34 percent Friday.
On Thursday, the government releases the first reading on third-quarter gross domestic product and the third quarter's employment cost index. Analysts surveyed by Reuters see GDP rising 4.4 percent, nearly tripling the 1.6 percent rate of expansion in the second quarter. The employment cost index is expected to gain 0.9 percent.
For bond investors, the gains could signal a big uptick in inflation, which erodes the value of a bonds' fixed-income payments.
"I think that it looks like what the market is doing is starting to look to Thursday's ECI and GDP numbers and starting to maybe get a little bit nervous about it," said Allison Montgomery, currency economist at IDEA Global.com.
Her firm forecasts a 4.7 percent rise in GDP and a strong 1 percent ECI gain.
With unemployment at a 29-year low, Alan Greenspan, the Federal Reserve chairman, has cautioned that rising wages could bring on increased inflation. The Fed, the nation's central bank, twice raised interest rates over the summer in a bid to pre-empt inflation and slow economic growth
Bonds have lost value or been flat nearly every day since Oct. 5, when the Federal Reserve left its main lending rate unchanged at 5.25 percent but signaled concern about rising inflation.
In another sign of bond market bearishness, the 30-year bond futures contract hasn't closed higher for two consecutive days since Sept. 23 and 24, according to Tony Crescenzi, bond strategist at Miller Tabak & Co.
"We maintain bearish short and long-term views of the fixed income markets, " Donaldson Lufkin & Jenrette said in an email to clients Monday.
Ahead Monday, the National Association of Realtors releases existing home sales data for
September. Analysts see existing home sales falling to an annul rate of 5.16 million units from 5.25 million in August.
Dollar mixed
The dollar was mixed against the major currencies after rising strongly Friday. Just before 9:10 a.m. ET, the dollar slipped to 105.50 yen from 105.90 Friday, a 0.36 percent drop in the dollar's value.
It cost $106.89 to buy a euro, down from $1.0694 Friday, nearly unchanged.
The dollar's position comes in sharp contrast to Friday, when the U.S. currency rose to a 10-day high against the euro and reversed most of its earlier losses against the yen as a strengthening U.S stock market drew overseas money into the U.S. currency. 
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