COMMODITIES : T-Bond Futures Skyrocket on Favorable Deficit News

Treasury bond futures soared Friday in reaction to news that the U.S. trade deficit for November had narrowed to $13.2 billion.

On other markets, stock index futures were higher, soybeans advanced sharply, grain futures were mixed, precious metals tumbled, livestock and meat futures were higher and energy futures retreated.

Bond futures traders on the Chicago Board of Trade could have reacted in either of two ways to the 25% improvement in the trade deficit, said Ira Epstein, president of Ira Epstein & Co. in Chicago.

The market could have viewed the report as a predictor of higher interest rates as U.S. demand for capital increases, Epstein said. Bond prices would decline in such a scenario.

Or the figure could mean that the dollar’s recent weakness against foreign currencies was creating greater global demand for U.S. goods, he said.

The latter interpretation won out, Epstein said.

“The trade feels higher interest rates at this juncture are not going to be necessary as a catalyst to attract foreign capital and that domestic demand for capital can be satisfied at current rates,” he said.

Bond futures made their greatest gains in the last hour of the session when prices cracked resistance at 89 24/32 points, said Ronald Kimmel, an analyst in New York with Shearson Lehman Bros.

Index Futures Advance

The contract for March delivery of the 30-year Treasury bond settled 2 22/32 points higher at 90 16/32.

The trade report also helped push stock index futures higher on the Chicago Mercantile Exchange.

The contract for March delivery of the Standard & Poor’s 500 index settled 4.05 points higher at 251.50. The underlying spot index closed at 252.07, up 6.16 points from Thursday’s close.

Soybeans settled sharply higher, while grain futures ended mixed and near their lows of the day after heavy profit taking on the Chicago Board of Trade.

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