Commodities for Friday, June 14, 1985 : Treasury Futures Rally

Prices of Treasury bond futures were sharply higher Friday on the Chicago Board of Trade as economic signals boosted anticipation of lower interest rates.

Treasury bond futures, which move inversely to interest rates, opened with moderate gains in response to a smaller-than-expected increase in the basic money supply reported Thursday by the Federal Reserve, said Steve Chronowitz, director of commodity research in New York with Smith Barney, Harris Upham & Co.

Prices subsequently posted a sharp rally on speculation that the Fed will cut the discount rate, the interest charged by the central bank for loans to member institutions.

The economy appears to be more sluggish than the Fed governors would prefer, Chronowitz said, and the lower-than-expected money supply figure would give them leeway to reduce interest rates without rekindling inflation.

“There’s been a very clear shift in investor thinking from inflationary days to a disinflationary perspective” Chronowitz said. “The bonds look like they’re catching up and believe that inflation is going to stay down for some time.”