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Bonds dip on inflation fear
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November 22, 1999: 9:14 a.m. ET
Treasury yields near highs for the month as oil rises, dollar weakens
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NEW YORK (CNNfn) - Treasury bonds fell nearly a half-point Monday, sending yields to some of their highest levels of the month as surging oil prices sparked fears of a pick-up in inflation.
Analysts also blamed a weakening dollar for the early bond losses, which fell nearly every day last week.
"We have fear of higher oil prices and the lower dollar against the yen," said Charles Reinhard, chief market strategist at ABN Amro.
Just before 9:10 a.m. ET, the price of the benchmark 30-year Treasury bond fell 14/32 to 99-01/32. Its yield, which moves inversely to the price, rose to 6.20 percent, near the high for the month, from 6.16 percent Friday.
Yields, Reinhard said, should continue to grind higher as long as signs persist of a strengthening economy and rising inflation, which erodes a bond's value.
"We're going to need to see a slowdown in growth," he said. "We know that energy prices are going higher and that's going to be bad news."
Oil prices Monday continued to climb, with Brent crude for January delivery jumping 2.5 percent to a nine-year high of $25.90 a barrel in London.
In addition to the day's weakening dollar, a series of other bond market negatives also persist.
Analysts say the surging stock market, because of its effect of making people feel wealthier, may lead to big increases in holiday spending. Unemployment dropped to a near 30-year low of 4.1 percent last month, sparking concern that business will spend more to retain employees.
Treasury bonds fell nearly everyday last week after the Federal Reserve raised its main lending rate by a quarter percentage point to 5.50 percent.
Dollar weakens
The dollar fell sharply against the yen Monday and weakened slightly versus the euro.
Just before 9:10 a.m. ET, the dollar slipped to 104.98 yen from 106.35 Friday, a 1.25 percent drop in the dollar's value.
Analysts attributed the yen surge to comments from Japan's Ministry of International Trade and Industry that the nation's third-quarter GDP data, to be released Dec. 8, likely will be above forecasts.
In the July-September period, the MITI's closely watched all-industries index, seen as a proxy for gross domestic product, rose 1.1 percent from the previous quarter
In addition the yen was "helped by the strong performance of the Nikkei stock index amid the refreshed optimism for Japan's economic recovery," Ruesch International said in a note to clients Monday.
The Nikkei jumped almost 1.4 percent to end at 18,822.12, a gain of 251 points.
Tim Fox, currency strategist with Standard Chartered Bank, sees the yen recovering into next year as the nation's economy shows signs of improvement.
It cost $1.0305 to buy one euro from $1.0294 Friday, a 0.10 percent fall in the U.S. currency's value. 
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