NEW YORK (CNNfn) - U.S. bonds leapt at the start Wednesday as investors, stunned by an effective devaluation of the Brazilian currency, fled en masse from battered global equities markets to a safe haven.
The benchmark 30-year Treasury issue was up 1-22/32 points at 102-9/32, sending its yield tumbling to 5.09 percent.
Traders also flooded into shorter-term bonds, pushing two-year notes up 11/32 to 100-9/32, driving yields down to 4.47 percent.
News that Brazil's central bank chief, Gustavo Franco, had resigned had already knocked the wind and money out of European stock markets, with traders fearing that risk from exposure to Latin American instability could spread.
The mood on Wall Street also looked grim. An hour before the U.S. stock market opening, the S&P futures index, a key indicator of early trading, was down its limit of 27 points.
This in turn pointed toward an almost-certain opening-bell stumble in U.S. blue chips of at least 200 points.
Chief among investors' worries cited for the flight from risk into the safety offered by bonds was the fear that currency deflation could spread from Brazil throughout emerging markets, possibly extending to the U.S. dollar.
While tendering his resignation, Franco said that the Brazilian central bank had scrapped its official trading bands for its currency, the real, effectively devaluating by 8 percent.
Franco's successor, Francisco Lopes, said the effective devaluation could climb as high as 12 percent in 1999.
Dollar firm for now
In early New York trading, the real had fallen to 1.3 reais to the dollar, close to the new trading band's lower boundary of 1.32 and sharply down from its Tuesday close of 1.211 to the dollar.
Against the yen, the dollar's recent weakness remained seemingly at bay, with the U.S. currency trading at 112.46 yen, near an overnight high of 112.75 but still ominously close to a 28-month low of 108.21 yen hit Monday.
The euro rose to $1.1747 from its London low of $1.1551.
Traders said renewed dollar selling by the Brazilian central bank to enforce the real's trading band could help support the U.S. currency in the short term.
Inflationary spoiler
With the attention of most market watchers turned overseas, few traders had much reaction to an inadvertent early release of U.S. inflationary data overnight.
The Labor Department accidentally posted its December producer price index Tuesday night, rather than at the scheduled time of 8:30 a.m. ET Wednesday.
Economists already had discounted the release, which indicated that the cost of producing goods had climbed 0.4 percent in December after declining 0.2 percent in November.
The market had forecast a gentler rise of 0.2 percent, but traders said the sudden PPI upswing could be largely written off as the impact of higher tobacco prices.
Rising inflationary forces normally send a discouraging signal to bonds and other fixed-income securities because higher inflation takes a bite out of real yields.
However, the fact that economists actually portrayed the PPI data as "benign," coupled with the looming Brazilian crisis, actually served to encourage Treasury buying on all levels.
Ten-year Treasury bonds were up 31/32 at 100-16/32, yielding 4.68 percent. The five-year issue was up 24/32 at 98-31/32 to yield 4.48 percent. 
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