T-Bonds Fluctuate Widely

Treasury bond futures prices fluctuated widely Thursday, rising by the limit allowed for daily trading early in the session but later collapsing at the Chicago Board of Trade.

The activity followed limit declines in the previous session.

Prices soared the limit of 2 points on Thursday’s opening, reacting to an expected cut in the discount rate charged by the West German central bank. This was followed by a report that Japan, too, would lower its discount rate on Monday.

But after the 2-point run-up, Treasury bonds settled unchanged to 12/32 lower with the contract for delivery in March at 94 6/32 points, unchanged from Wednesday’s close.

There is, however still considerable controversy over whether the Federal Reserve Board, the U.S. central bank, will soon cut its discount rate, said Gary Dorsch, an analyst with G. H. Miller & Co. The discount rate is the interest that the Fed charges on loans to financial institutions.

“It’s been widely assumed that the Fed will follow suit,” Dorsch said.