Treasury Rally Trimmed

Treasury bond futures soared higher again Tuesday before profit taking sharply trimmed those gains near the close of trading.

Slumping energy prices and other signs of lower inflation have put T-bond futures on a steady run-up for nearly two weeks, and Tuesday started as no exception.

“But nothing goes in a straight line,” said Gary Dorsch, an analyst with G. H. Miller & Co. “The current rally has been overdone, and the market was ripe for profit taking.”

The run-up earlier in the day, Dorsch said, was a response to continuing weakness in energy prices and speculation that West Germany and Japan could be cutting interest rates soon in an attempt to stabilize the dollar on foreign exchange markets.

Also, he said, U.S. bond dealers were reported to be heavy buyers in anticipation of a possible strong increase in Japanese participation in the market. There is some belief that the Japanese finance minister may relax restrictions that currently limit the involvement of Japanese in overseas markets, Dorsch said.

Crude oil futures tumbled past another milestone on their headlong plunge, slipping under $12 a barrel on the New York Mercantile Exchange.