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Bonds falter, dollar stalls
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March 17, 1998: 5:30 p.m. ET
Late sellers pressure bonds, dollar follows British pound after budget
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NEW YORK (CNNfn) - U.S. bond markets, which had ignored strong economic data early in the day, attracted sellers late in the session and finished lower Tuesday.
The dollar also ended mostly lower, hurt by an ascending British pound after a budget speech that suggested high inflation and bigger borrowing by the United Kingdom this year.
Bonds started the day mostly higher, ignoring a 6 percent surge in February housing starts and a market-neutral industrial production report. The market chose instead to focus on a strong dollar, and falling world oil prices - a sure indicator inflation won't be a threat for a while.
But despite little other market disturbing news, sellers emerged late in the day, reversing the course of the market and pushing the price of the benchmark 30-year Treasury bond down 10/32 of a point, for a yield of 5.87 percent.
Trading in bonds is likely to remain quiet Wednesday as many investors await Thursday's January trade balance and February Consumer Price Index reports.
Meanwhile, the dollar spent the day in a narrow range against the German mark, but fell against the British pound and the Japanese yen. The pound's lift was triggered by a currency-friendly budget speech from British Finance Minister Gordon Brown, who predicted higher inflation and more borrowing in Britain's new fiscal year. This in turn could lead to higher interest rates, which automatically would raise the value of the pound.
Following the budget speech, the pound rose to its highest level against the dollar so far this year, and hit a seven-month high against the mark.
The dollar also fell against the yen, mostly on speculation that the Bank of Japan may intervene soon to prevent the yen's recent slide. But Japan's festering economic crisis and its government's failure to adopt effective measures to stimulate growth, continued to provide support for the dollar, which is expected to remain strong against Asian currencies over the near term.
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