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Bond breathes new life
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January 6, 1999: 3:49 p.m. ET
Long bond puts end to two-day skid, despite stock gains and home-sales surge
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NEW YORK (CNNfn) - New life for a recently stumbling dollar lifted U.S. Treasury bonds Wednesday, despite an explosive stock market and a solid economic picture.
At around 3:30 p.m. ET, the 30-year benchmark Treasury issue was up 21/32 in price at 101-8/32 with the yield, which moves in the opposite direction, back down to 5.16 percent.
The greenback continued to rebuild from losses suffered against Japan's yen Tuesday, adding 1.5 to 113 yen.
Meanwhile, the euro fell sharply against the dollar, hitting as low as $1.1553 before edging back up to a recent quote of $1.1625.
But analysts say the long-term prospects for the euro is bright, because world central banks may shake-up their reserves by buying euros.
"The dollar will be a loser in the end," said Bronwyn Curtis, chief economist at Nomura International. "It's the biggest thing the central banks hold."
"They're looking - particularly the Asian central banks - are looking at replacing some of their dollar holdings with euro," Curtis said.
With investors evidently focusing on dollar strength, the bond trekked up despite a huge rally on Wall Street. By late afternoon, the Dow Jones industrial average had rocketed 236.36 points to 9,547.55, which would be a new record high close.
Fixed-income securities such as bonds have recently been dumped by investors as stocks gain - and that hurts Treasury prices.
Shorter-term Treasurys were slower to take off, languishing in negative territory until late in the day due in part to the stock market gains.
And market players also shrugged after a report showing a hearty U.S. economy, which would usually have a deleterious effect on bonds.
Warm weather helped sales of new single-family homes surge 7.6 percent in November last year, the fastest rate on record and more than double economists' forecasts.
A flood of corporate debt issuance in January is expected to put pressure on Treasury issues by causing investors to cash out of bonds, bills and notes to pay for the new issues.
But analysts said the market performed well through corporate debt issues on Wednesday.
And the Treasury Department sold $8 billion in inflation-indexed notes, with a bid-to-cover ratio of 3.12 percent, suggesting solid demand for that issue.
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