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Bonds quiet . . . too quiet
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March 3, 1999: 9:06 a.m. ET
Dollar surges, but Treasury market nurses bruises, looks to Greenspan comments
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NEW YORK (CNNfn) - Bond prices crept furtively higher thanks to a stronger dollar Wednesday morning, but activity was subdued as nervous traders looked for direction, turning back to Alan Greenspan for crumbs of interest rate wisdom.
By 9:00 a.m. ET, the benchmark 30-year Treasury bond was up 1/32 of a point in price at 94-24/32, while the yield inched lower to 5.61 percent.
Trading was lackluster, with many key players on both sides of the Pacific sidelined. Japanese investors traditionally trim their dollar-denominated holdings ahead of the April 1 fiscal new year, deflating the Treasury market.
Meanwhile, U.S. traders have grown increasingly wary of higher interest rates on the horizon, driving bond yields up to six-month highs as an increasingly large portion of the interest picture comes into focus.
These traders now look toward fresh testimony from Federal Reserve Chairman Alan Greenspan for support.
Although Greenspan is slated to talk about Social Security at his 10:00 a.m. ET appearance, the bond market has grown increasingly fascinated by the Fed chief's slightest nuances and will be watching for any tangential hints to his current interest rate policy.
The Federal Open Market Committee, which Greenspan chairs and which regulates U.S. interest rates, next meets on March 30. Many economists now look to the Fed to raise interest rates in order to release some of the expansive pressure now building in the economy.
Moreover, Greenspan could have a more direct impact on U.S. financial markets. His negative stance on President Clinton's plan to fund Social Security through federal investment in the stock market is well-known, so the Treasury market could potentially rise or fall according to Wall Street's reaction to the fresh comments.
Traders said the Treasury market is otherwise biding its time until Friday's release of payroll data, a key indicator of wage inflation at work in the U.S. economy. Increasing wage inflation tends to spark higher price inflation, rendering fixed-income securities like bonds a comparatively unappealing investment.
On the positive side, bond prices got a lift from a climbing dollar, which surged overnight against the yen after the Bank of Japan injected fresh cash into the Tokyo currency market, driving local interest rates even closer to nil.
By mid-morning, the dollar had leapt more than an entire yen to 121.29 yen from its previous close of 120.06. The euro also gave up ground against the greenback, sliding to a new low of $1.0878. 
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