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Bond looks for direction
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December 16, 1998: 9:19 a.m. ET
Treasury market focus on stocks, with Clinton, Japanese trade and Iraq factors
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NEW YORK (CNNfn) - U.S. Treasury prices drifted slightly lower Wednesday as bond investors awaited the stock market's reaction to domestic political tensions, possible new friction in the Persian Gulf and Brazil's efforts at reform.
Shortly before 9 a.m. ET, the 30-year Treasury issue was down 2/32 in price at 103-10/32 as the yield, which moves in the opposite direction from price, edged up to 5.03 percent.
Wall Street stock market moves are expected to be a key driver behind bonds Wednesday, as investors decide whether to park their money in safer Treasury issues.
Based on early S&P Futures trading, the Dow Jones industrial average appeared set for a slightly higher open at 9:30 a.m.
Also weighing on the minds of bond players was a looming vote in the House on whether to impeach President Clinton and a tense mood about whether Brazil, a key U.S. trading partner, would follow up on reform plans.
Meanwhile, the bond didn't experience much of a safe-haven rally after a surprise pullout Wednesday of U.N. arms inspectors from Iraq.
That bolstered crude oil prices, whose recent fall has smacked of lower inflation pressures and rallied bonds in recent weeks.
The bond market shrugged off a report showing U.S. housing starts fell a faster-than-expected 2.7 percent in November to an annualized rate of 1.649 million units. That came on the heels of a solid 8.0 percent gain in October.
"We are coming off strong numbers, and I don't think we would want to say bad things about the housing market on the basis of these numbers alone," said Robert Brusca, chief economist at Nikko Securities.
That was the latest in the medley of economic data the Federal Open Market Committee will digest to decide whether to lower interest rates when it meets Tuesday. Many analysts say the economic picture doesn't warrant further rate cuts.
The dollar slipped a half-yen to 115.92 against the Japanese currency, but was up from its overnight low after a report showed Japan's current-account surplus continues to balloon.
That could raise trade with the United States and its other trading partners, especially as Japan's consumption of imports remains lackluster.
But the greenback was up slightly at 1.6630 German marks, helped modestly after Fitch IBCA lowered the debt rating of Belgium, a member, along with Germany, in the "euro" zone. That new currency is set for a launch in January. 
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