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Stocks see red, bond charges
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September 17, 1998: 4:01 p.m. ET
Investors flee stocks for Treasurys, as U.S. economic picture, dollar soften
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NEW YORK (CNNfn) - U.S. Treasurys held onto hearty gains Thursday as the Dow Jones industrial average racked up big losses, driving the bond's yield to an all-time new low.
At around 3 p.m. ET Thursday, when futures- market trading closed, the benchmark 30-year Treasury issue was up 18/32 at 104-22/32 in price as the yield, which moves in the opposite direction, fell to 5.18 percent, a record low in the 21-year history of the bond.
David Horner, a bond trader with Merrill Lynch, said the bonds rode the weakness in stocks and relatively anodyne reports from the government about the U.S. economy.
The Dow was down 200 points for much of the day Thursday as stock markets in Europe, Asia and Latin America also spilled.
"What happened really happened early in the day and overnight - it emanated from the pull-back in stocks," he said. "It was another mini-crisis in the equity market."
A worldwide stock sell-off erupted in the wake of comments on Wednesday by Federal Reserve Chairman Alan Greenspan, who told a Congressional panel that the world's major central banks have not planned coordinated action to cut interest rates.
In fact, on Thursday, the German central bank, the Bundesbank, held firm on three key rates, as European Union nations set the stage for the launch of its Euro currency next year.
That didn't hurt the dollar, even though many analysts expect top Fed policy makers to seek lower interest rates, either at their Sept. 29 meeting or later this year.
The German mark was virtually unchanged from Wednesday's close, at a level of 1.6926 to the dollar.
The weak Wall Street performance hurt the dollar against the yen. The greenback fetched 1.32.37, down 2.88 yen, against the Japanese currency in Thursday afternoon U.S. trading.
Also Thursday, Federal Reserve Governor Roger Ferguson showed tempered optimism about Asia's ability to rebound from its current crisis.
But in more bullish words for the bond market, he echoed recent remarks from Fed chief Greenspan that the risks of inflation and deflation in the U.S. economy are balanced.
A spate of economic reports pulled the bond in opposite directions, but neither impulse was as overpowering as the stock sell-off.
The Commerce Department said the nation's trade gap rose to $13.9 billion in July, but that was less than economists had expected, giving a bullish prod to bonds.
Then the Labor Department reported the Consumer Price Index rose 0.2 percent last month, in line with expectations, chipping into the bond's gains, traders said.
Signs of weakness in the Northeast also powered the bond higher, by raising concerns about an economic slowing - and a resultant need to lower interest rates.
The Philadelphia Fed's business conditions index posted a sharp turnaround in September into negative territory, suggesting several Mid-Atlantic states in that Fed's region may be undergoing a slowdown.
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