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Bonds fall on trade gap
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August 19, 1999: 9:26 a.m. ET
Record $24.6B imbalance sends Treasuries, dollar falling
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NEW YORK (CNNfn) - News of another record trade deficit sent Treasury bond prices and the dollar falling Thursday morning.
Just before 9:15 a.m. ET, the price of the benchmark 30-year Treasury bond fell 11/32 to 101-12/32. Its yield, which moves in the opposite direction from the price, rose to 6.02 percent from Wednesday's close of 6.00 percent.
The sell-off came immediately after the Commerce Department said the U.S. trade deficit in June rose to a record $24.6 billion, well above the $20.5 billion analysts expected.
Pushed by a flood of imports, the widening of the deficit from $21.2 billion in May continues a string of record trade imbalances that have come as a strong dollar has hampered exports while encouraging imports.
Economists had hoped a slight drop in the deficit would signal that overseas economies are recovering. Further, a widening trade imbalance could lead to a downward revision of second quarter gross domestic product.
The news sent the dollar lower against the major currencies. The euro, meanwhile, probed new lifetime lows against the Japanese currency, while the dollar tested seven-month lows against the yen.
Just before 9:15 a.m. ET, the yen strengthened to 111.14 against the dollar from 111.89 late Wednesday. At one point immediately after the release, the yen fell below the psychologically significant 111 mark.
The euro, meanwhile rose against the dollar, helped in part by a report showing German business confidence strengthened in July. Just before 9:00 a.m., ET, the euro climbed to $1.0533 from Wednesday's close of $1.0520.
Thursday morning's fall in Treasuries comes a day after bonds staged a surge that pushed the yield on the 30-year bond below the psychologically significant 6 percent for the first time this month.
Despite Thursday morning's sell-off, analysts expect bonds to drift ahead of next week's key meeting on interest.
On Tuesday, the Federal Reserve's policy-making board meets to set interest rate policy. Analysts expect the Federal Open Market Committee to raise short-term interest rates by a quarter of a percentage point.
Faced with signs of rising inflation and tight labor markets, the Federal Open Market Committee increased the federal funds rate by a quarter percentage point to 5 percent in June.
In the day's other major economic indicator, the Labor Department said jobless claims for the week ended Aug. 14 rose to 287,000 from 283,000 the previous week, below the 291,000 claims analysts expected.
The number is consistent with the low unemployment and tight labor markets that have existed for the past several years.
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