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Bonds lie flat, eyeing Brazil
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October 28, 1998: 9:30 a.m. ET
Strong durables orders don't faze Treasurys; Dollar holds steady
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NEW YORK (CNNfn) - Bond prices shook off a stronger-than-expected report on U.S. economic activity and drifted only slightly Wednesday, as market players eye details of Brazil's economic reform plan.
At around 9 a.m. ET, the benchmark 30-year bond was off 3/32 in price at 106-5/32, with the yield, which moves inversely, up to 5.09 percent.
A hodgepodge of factors was pulling bonds in opposite directions Wednesday, including new offerings, a bailout plan for Brazil, stock market moves and hedge fund repositioning.
The economy pitched yet another curve ball at the bond market Wednesday. The Commerce Department reported a rise in durable goods orders last month, while a drop was expected.
That came a day after a weaker-than-expected report on consumer confidence, which fell to a new 22-month low. Several analysts said that would make the case for further interest rate cuts by the Federal Reserve.
But any sign of a strengthening economy, such as higher durable goods orders, could make Fed policy makers think twice before any such rate cut, in fear of sparking an inflationary trend.
Meanwhile, corporate and government bond issuance was set to continue, adding supply to a reluctant market. The Treasury Department is expected to issue $16 billion of two-year notes, while mortgage reseller Fannie Mae is set to price $3 billion to $4 billion in five-year issues.
That came after the second-largest ever issuance of a corporate bond, a $4.8 billion sale of 5-year, 10-year and 20-year bonds by Associates First Capital.
"There just has not been any appetite for corporate debt and corporate bonds," said Michelle Laughlin, Treasury market expert at Prudential Securities.
"The fact that this very large deal yesterday was able to get done with the kind of demand that we saw was another sign that maybe we're seeing some liquidity returning to the market and buyers are coming back," she added.
In the currency market, investors were fixating on the details on a massive reform plan, including $23 billion in tax hikes, for Brazil to prevent economic collapse there.
The plan announced Tuesday by Brazil's president, Fernando Henrique Cardoso, set out $7.3 billion in government spending cuts to battle the country's $55 billion deficit.
Speculation a currency devaluation may be on the way in Brazil didn't rattle the U.S. dollar. The American economy is closely tied to Brazil's, which cements a close link between their two currencies.
The greenback was virtually unchanged against Germany's mark and the Japanese yen.
The dollar fetched 117.75 yen, drifting slightly, after the Bank of Japan agreed to hold its line in already-low interest rates, as expected.
Meanwhile, the German mark was in a narrow band against the dollar, at 1.6511 marks to the U.S. currency after an official at the Bundesbank Tuesday ruled out an interest rate cut in Germany anytime soon. 
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