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Bond yield sinks again
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October 5, 1998: 4:02 p.m. ET
Lack of G-7 deal, stock market jitters, Criimi Mae collapse lift bonds to record
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NEW YORK (CNNfn) - An already Herculean market for U.S. Treasury bonds grew even stronger Monday as stock markets sank again and industrialized nations failed to concoct a bailout plan for weak world markets over the weekend.
At around 3:50 p.m. ET, the 30-year benchmark Treasury issue was up 2-2/32 in price to 112-9/32 as the yield, which moves in the opposite direction, fell to 4.72 percent, a new all-time low.
Elsewhere in the Treasury market, the five-year note fell below the 4 percent mark, which analysts called a key psychological milestone, for the first time since November 1963.
A battered Wall Street gave rally-minded bond traders further fuel to push prices higher Monday, as investors retreated into the stable terrain offered by the market for Treasurys.
"The bond market expects the stock market to fall very hard ... people are trading scared," said Anthony Crescenzi, bond market analyst with Miller Tabak Hirsch.
The Dow Jones industrial average slipped sharply after the weekend meeting of finance ministers and central bankers from the "Group of Seven" industrial nations failed to produce any accord to rescue ailing world markets.
In a statement, the G-7 officials stressed the need for nations to boost their own economies and help others in crisis, but it didn't call for an orchestrated effort to inject liquidity into global markets.
"U.S. stocks are struggling again today, and that has just added more fuel to the fire," said Kevin Flanagan, a bond trader with Morgan Stanley Dean Witter. "We need a fix to see that things are coming under control."
"Everyone was expecting an announcement, and instead there was the usual jawboning," he added.
Among solutions markets are looking for, analysts said, are a strengthening of Japan's embattled banking system, a rescue package for Brazil by the International Monetary Fund and, to a lesser extent, support for Russia.
Meanwhile, the bond got a boost after mortgage broker Criimi Mae filed Monday for bankruptcy protection, as the turmoil in stock and bond markets led its lenders to demand payment in collateral.
That, analysts said, was not enough to spook markets alone but did contribute to the climate of fear that other, larger firms might crumble in the current market swelter.
"It is a microcosm of events generally hitting the market," said Crescenzi, "and it reinforces the notion that there are yet-to-be-reported losses at other institutions that would pose systemic risk."
Dollar still sweltering as Wall St. lags
The weakness on Wall Street and across major markets in Latin America, as important U.S. trading partners, was keeping the dollar under pressure most of the day.
The Brazilian Bovespa was slumping sharply Monday despite signs over the weekend that President Ferdinand Enrique Cardoso may be re-elected in Brazil. His re-election could help keep an IMF rescue package on track for quick enactment, analysts said.
The dollar was off 1.15 yen to fetch 134.25 Japanese yen, despite a morning story in the New York Times that suggested key banks in Japan have low capital levels.
The German mark held onto its morning gains, hovering at 1.6331 marks to the dollar, up about 1.3 pfennigs.
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