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Bonds ill as stocks get a pill
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September 8, 1998: 9:27 a.m. ET
Speech by Fed chief Greenspan buoys stock markets, and that hits Treasurys
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NEW YORK (CNNfn) - U.S. Treasurys opened lower Tuesday as the battered stock market appeared set for a bounce that would draw funds out of bonds after a Friday speech by the nation's top banker.
At around 9 a.m. ET Tuesday, the benchmark 30-year Treasury issue was down 27/32 to 102-9/32 in price as the yield, which moves in the opposite direction, rose to 5.33 percent.
Federal Reserve Chairman Alan Greenspan said the U.S. economy isn't immune to global market pressures and that the risk of inflation has diminished as stock markets worldwide careen lower.
It is "just not credible that the United States can remain an oasis of prosperity unaffected by a world that is experiencing greatly increased stress," he said, speaking at the University of California at Berkeley Friday.
Greenspan said the Fed's policy-making panel, the Federal Open Market Committee, recently agreed the risks to the economy are evenly balanced between economic slowdown and inflation.
On the heels of those remarks, which suggested an easing in U.S. monetary policy might be on the horizon, stock markets around the world soared.
Wall Street appeared set to return after the three-day U.S. Labor Day weekend in bullish form Tuesday. The S&P Futures index on the Globex trading system pointed to a triple-digit gain in the Dow Jones industrial average at the start of trading.
The primary driver to the bond market in recent weeks has been a reeling stock market that has caused many investors to seek refuge in bonds.
That link between stocks and bonds has become so indelible, some analysts say, that the Treasury market is moving almost entirely on signals from Wall Street and paying much less attention to the currency market and domestic economic data.
In the currency market, the dollar bounced back against the Japanese yen after slipping overnight amid the weakness on Wall Street.
The dollar recently was quoted down slightly against the yen at 132.89 to the dollar, but analysts said the yen may drift lower once markets again focus on the intractable banking troubles in Japan.
The dollar was also down slightly against the German mark, after paring its losses following a second vote by the Russian Duma to reject Victor Chernomyrdin as President Boris Yeltsin's choice for prime minister.
The mark, which is linked in part to Russia because of Germany's large investments there, sat at 1.7319 to the dollar Tuesday morning.
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