CREDIT: Bond Prices Rise as Inflation Fears Ease
Bond prices rose sharply Thursday as oil prices moderated and the credit markets took a relaxed view of inflation.
The Treasury’s bellwether 30-year bond climbed 11/16 point or about $6.87 per $1,000 in face amount after gaining about $1 Wednesday. Its yield, which falls when the bond’s price rises, slipped to 8.81% from 8.88% late Wednesday.
Oil prices were lower much of the day, defusing some of the concerns about inflation that have gripped financial markets since the Aug. 2 Iraqi invasion of Kuwait. William V. Sullivan, director of money market research for Dean Witter Reynolds Inc., said the bond market was confident enough about inflation that it remained on the upside even when oil prices reversed course on a report that Israeli soldiers wounded dozens of Palestinians in clashes in the Gaza Strip.
Analysts said some of the bond market’s calm also came from a lower-than-expected increase in the Consumer Price Index. The Labor Department said prices excluding energy rose only 0.4% in September, the same as the previous month.
The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 7.938%, up from 6% late Wednesday.
CURRENCY: Dollar Hits Another Low Against Mark
The dollar skidded against major currencies Thursday, reaching the latest in a string of record lows against the German mark.
The dollar also dropped to its lowest level against the Japanese yen in 21 months.
The dollar’s decline was particularly acute against the German mark, falling through a psychological barrier of 1.50 marks to 1.4970 in New York, down from 1.5125 Wednesday.
The dollar’s dip below the barrier could trigger further selling, traders said.
In New York, the dollar closed at $124.40 Japanese yen, its lowest since January 1989. It was $125.43 late Wednesday.
It cost $1.9710 to buy one British pound, more expensive than Wednesday’s $1.9615.
COMMODITIES: Precious-Metals Futures Edge Up
Precious-metals futures finished higher on the Commodity Exchange in New York.
Gold and silver trading mirrored the crude oil market, with prices down early in the day but recovering at the close.
Gold settled $2.80 to $3.40 higher, with the contract for October at $370.10 an ounce, and silver 0.1 to 0.2 cent higher, with October at $4.198 an ounce.
Wheat futures prices were mostly higher, but corn and soybean prices were off on the Chicago Board of Trade.
