Markets & Stocks
Fed no help for bonds
September 17, 2001: 4:27 p.m. ET

Central bank intervention boosts U.S. currency, but bonds extend losses
graphic graphic
NEW YORK (CNNfn) - U.S. Treasury bond prices fell Monday despite an interest-rate cut by the Federal Reserve and a steep selloff on Wall Street, as U.S. markets got back to business following the worst terrorist attack in American history.

At the early 2:00 p.m. ET close, two-year notes were down 4/32 at 101-9/32, while their yield, which moves opposite to price, rose to 2.94 percent. Five-year notes fell 10/32 to 103-2/32, yielding 3.9 percent.

The 10-year note fell 16/32 to 102-31/32, yielding 4.62 percent. The 30-year bond fell 29/32 to 99-12/32, yielding 5.42 percent.

Interest rate cuts by the Federal Reserve, the European Central Bank, and the Swiss National Bank steadied investors' nerves in the first day of stock trading following terrorist attacks that destroyed the World Trade Center in New York and damaged the Pentagon outside of Washington, D.C.

U.S. stocks sold off heavily, but in an orderly fashion, traders said, following a four-day hiatus, the longest such suspension since the Great Depression. It was the worst one-day point loss in the history of the Dow Jones industrial average, but it didn't even break the top 10 in terms of percentage losses.

Nevertheless, Treasury prices were negative all day, as traders bet that stocks would stabilize and cashed in on last week's big gains.

"We got the Fed ease, and the stock market, while it's down, is not anything horrific," said Gib Clark, head trader at Zions First National Bank Capital Markets. "Some stocks have come off their lows."

Bond trading will also close at 2:00 p.m. ET Tuesday and Wednesday, at the recommendation of the Bond Market Association.

Click here for more on bonds and rates

The U.S. dollar, meanwhile, recovered earlier losses Monday after the intervention of the central banks and the relative stability of the stock markets.

The dollar was trading at 117.71 yen, above seven-month lows set in earlier trading, and the euro fell to 92.40 cents after approaching six-month highs against the dollar.

The Fed's eighth rate cut of the year, bringing its target for short-term rates to 3.0 percent from 3.5 percent, helped ease fears about the health of the U.S. economy. Subsequent rate cuts by the ECB, Swiss National Bank and Bank of Canada added to the sense of security, and stocks were not as bad as they could have been.

Earlier in the day, the Bank of Japan bought dollars on concerns Japan's fragile economy would suffer if a strong yen made its exports less attractive. The dollar has fallen about 3 percent since Tuesday's attacks. graphic

-- from staff and wire reports


U.S. stock markets sharply lower in reopen - Sept. 17, 2001

Fed cuts rates a half percentage point - Sept. 17, 2001


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