Drop in Dollar Abroad Hurts Bond Market
The bond market followed the decline of the dollar on foreign exchange markets Thursday as traders were disappointed by West German steps to help stabilize the U.S. currency.
The bellwether 30-year Treasury bond fell 1/8 point, or $1.25 per $1,000 face amount, while its yield rose to 7.35% from 7.34% late Wednesday. Corporate and municipal bonds were unchanged to slightly lower.
Trading ended early because of bad weather in the Northeast.
The West German central bank cut key interest rates by half a percentage point on Thursday to halt the recent sharp advance of the West German mark against the dollar and other major currencies.
Sought by Reagan
The Reagan Administration has been pressing for the cuts, which will stimulate West Germany’s economy and raise demand for U.S. products to help trim the massive U.S. trade deficit.
But investment adviser Jay Goldinger of Beverly Hills said U.S. bond traders were disappointed that West German officials also took steps to restrict growth in the West German money supply. Those restrictive measures displeased dollar traders, and the dollar declined on currency markets.
Bond prices and the dollar also fell because concrete steps toward stabilizing the dollar did not emerge from Wednesday’s meeting between Japanese Finance Minister Kiichi Miyazawa and Treasury Secretary James Baker.
Secondary Market
In the secondary market for Treasury securities, prices of short-term maturities ranged from unchanged to 7/32 point lower, intermediate maturities ranged from unchanged to 3/32 point lower and 20-year issues down 1/8 point, according to the investment firm of Salomon Bros.
