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Bonds soar in relief
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March 5, 1999: 9:12 a.m. ET
Job report confirms lack of wage inflation, sparking Treasury rebound
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NEW YORK (CNNfn) - The suspense finally ended for the Treasury market Friday, with bond prices lifting in a tremendous sigh of relief after a nervously-awaited payroll report was less than apocalyptic.
Although the Labor Department said the U.S. employment market had grown by 275,000 jobs in February, more than economists had forecast, the numbers still came in lower than the bond market's worst-case scenario of 300,000 new jobs.
For inflation-allergic investors, however, the real news was average hourly earnings, which rose only a minimal 1 cent in the month. The market had steeled itself to expect a 3-cent raise, leaving traders profoundly enthusiastic to get proof that wage inflation remains in check.
Bond prices surged, with the benchmark 30-year Treasury bond soaring 1-31/32 points to 95-17/32, while the yield dropped 14 basis points to 5.55 percent.
Ten-year paper leapt 1-11/32 to yield 5.23 percent, while two-year notes were up 10/32 to yield 5.02 percent.
Growing inflation hurts the bond market by eating into the real value of Treasury bonds and other fixed-income securities. Many investors, as well as Federal Reserve Chairman Alan Greenspan, pay special attention to signs of wage inflation as a likely spark for rising U.S. prices.
Dollar at rest
The dollar, meanwhile, rested on its laurels, sliding against other global currencies after keeping the euro near lifetime lows and climbing more than 4 yen, or 3.5 percent, since Monday.
By mid-morning, the greenback had slipped back to 122.93 yen from its previous close of 123.47, still within striking distance of three-month highs touched Thursday.
However, thin profit-taking and an export-driven 5-percent rally in Tokyo stocks knocked the luster off dollar/yen gains, while the euro bounced up to $1.0832, well off its Thursday close of $1.08.
Unlike the bond market, dollar activity remained subdued in the wake of the payroll figures.
Traders said currency players had already priced expectations of a continued strong labor market into the dollar's week-long ascent, and so it would take a dramatic surprise to budge the currency one way or another.
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