Treasury Bond Futures Rise

Government reports signaling lower inflation and a more subdued economy sent Treasury bond futures to new highs Friday.

Industrial production was down 0.6% in February, while the market was expecting a 0.2% decline, said Gary Dorsch, an analyst in Chicago with G.H. Miller & Co.

“And there was favorable news on inflation with the producer price index falling a sharp 1.6% in February,” he said.

The implication for T-bond traders, he said, is that it appears “the economy is falling asleep and may require a stimulus in the form of lower interest rates.”

The T-bond contract for delivery in March jumped 1 13/32 to reach new life-of-contract highs before settling at 97 12/32 points, up 13/32 for the day.

“We should continue to see negative growth rates in inflation for the next several months,” Dorsch said. With this in mind, the spot T-bond contract could go as high as 102 by the end of April, he said, a level last seen in January 1978.

Gasoline futures prices advanced on the New York Mercantile Exchange, but most other energy contracts were weaker.