CREDIT : Bond Prices Slide Despite Dow Tumble
Bond prices slipped Monday in light trading in spite of the plunge in stock prices on Wall Street, which usually benefits bonds.
The Treasury’s benchmark 30-year bond fell 11/32 point, or $3.46 per $1,000 face amount, while its yield, which rises when prices fall, rose to 8.30% from 8.26% late Friday.
On Wall Street, stock prices took their biggest tumble in three months. The Dow Jones industrial average fell 77.45 to 2,600.45, its largest one-day point loss since it fell 190 points last Oct. 13.
A decline in stock prices usually is good for the bond market since it indicates that the Federal Reserve may ease interest rates to boost the economy. Lower interest rates benefit the bond market since they increase the value of fixed-return investments.
“All the influences were positive but they didn’t have much effect,” said James Capra, a senior vice president at Shearson Lehman Government Securities Inc. In addition to the drop on Wall Street, he said the bond market should have benefited from lower gold prices and a stronger dollar.
But weighing against any rise in bond prices were two factors, Capra said: two major government bond auctions this week and continuing concern that Japanese investors were losing interest in U.S. government bonds due to a narrowing in the difference in yields between Japanese and U.S. bonds. Japanese investors are major purchasers of U.S. government securities.
The federal funds rate, the interest rate that banks charge each other for overnight loans, was quoted at 8.125%, unchanged from late Friday.
CURRENCY Dollar Rises on Fears of Global Unrest The dollar rose against most major currencies despite the steep slide in stock prices on Wall Street.
The dollar benefited from sales of West German marks. Currency dealers dumped marks as they mulled the implications of fighting in Soviet Azerbaijan and rumors of unrest in Eastern Europe, said John McCarthy, chief dealer at the Amsterdam Rotterdam Bank’s office in New York.
But the dollar rally met resistance amid speculation about possible central bank intervention to curb its advance, he said.
Enthusiasm to buy dollars also was tempered in the afternoon as the stock market piled up losses.
“I’m quite surprised the dollar isn’t lower given that the stock market is down a ton,” McCarthy said.
A belief that the Federal Reserve Board is unlikely to ease its monetary policy--which contributed to Wall Street’s selloff--fortified the dollar.
COMMODITIES Orange Juice Soars After Frost Report Orange juice futures prices soared to record highs on the Chicago Board of Trade following a government report showing far more damage to the Florida orange crop from last month’s freeze than traders had expected.
On other futures markets, pork futures surged while livestock futures were mixed, energy futures fell, precious metals were mixed, and grains and soybeans were mixed.
Futures prices for frozen concentrated orange juice soared 4.3 to 7.55 cents with the spot contract for January delivery settling at $1.9625 a pound and the more heavily traded March contract at $2.0535.
The March settlement price was the highest ever for an orange juice futures contract, eclipsing the previous high of $2.0425 set July 18, 1988, after frost damaged the Brazilian orange crop.
The rally was largely a reaction to a report released Friday by the Florida state division of the Agriculture Department that said only 32% of the orange crop escaped damage from the Christmas freeze, compared to a previous estimate of 44%.
Buyers were also reacting to an announcement Monday by Brazilian orange juice processors that they were raising their price for orange juice concentrate 20 cents to an effective rate of about $2.08 a pound, said analyst Ernie Thomas of Merrill Lynch Consumer Markets Inc. in Winter Haven, Fla.
