FINANCIAL MARKETS : T-Note Sale Goes Well; Dow at Record High : Market Overview
Strong demand at the Treasury’s sale of new 10-year notes helped pull interest rates lower across the board. The 30-year bond yield hit another low.
* Stocks closed modestly higher, and the Dow industrials hit a record high as optimism about lower interest rates encouraged buyers.
* The dollar hit another postwar low against the Japanese yen. Gold prices fell again.
Credit
The Treasury’s sale of 10-year notes, the second leg of its three-part quarterly refunding this week, went exceedingly well, traders said.
The government sold $11.03 billion in 10-year notes at an average yield of 5.78%, the lowest level since the Treasury began issuing 10-year notes in 1976. The yield also was down from 5.96% at the last auction May 12.
Most important, the ratio of offers to buy the securities compared to the amount sold was 3.1 to 1, a record high for an issue of 10-year notes and an indication of investors’ anxiousness to lock in yields.
Traders said some investors may believe the 10-year note is a better value than the 30-year bond because the spread between the two securities has narrowed significantly in recent weeks as the 30-year yield has fallen.
Even so, the 30-year yield continued to slide Wednesday, closing at a new historic low of 6.42%, from 6.44% on Tuesday.
Today, the Treasury will sell $11 billion in new 30-year bonds in the final leg of the quarterly refunding. On a when-issued basis, the new bonds are trading at a yield of about 6.37%, another measure of investors’ and speculators’ willingness to bet that interest rates will continue to fall.
The bond market has been buoyed all week by the prospect of reduced government borrowing with passage of President Clinton’s budget in Congress. Many analysts also believe that the tax hikes in the Clinton plan will slow the economy, taking further pressure off interest rates.
Stocks
Stocks were broadly higher on rising trading volume.
The Dow industrials added 10.62 points to a new record 3,583.35, eclipsing the old high of 3,576.08 set Monday.
Advancing issues topped losers by about 11 to 9 on the Big Board, where volume swelled to 268.33 million shares.
Also hitting a new high was the NASDAQ composite index of mostly smaller stocks.
Share prices were bolstered by the continuing decline in interest rates, traders said. Rallies in overseas markets also helped.
In London, stocks ended the day sharply higher, with the FTSE-100 index surging 34.5 points to a record 3,006.1.
In Paris, the CAC-40 index also hit a new high, up 27.61 points to 2,167.39, as French bond yields plunged after the Bank of France cut its 24-hour lending rate for the second time this week.
In Tokyo, the Nikkei average jumped 238.82 points to 20,732.57.
Among U.S. market highlights:
* Semiconductor stocks led the market after the industry’s trade group reported a stronger than expected reading on orders for new chips. Intel rose 1 7/8 to 58 3/4, Motorola gained 1 to 96 and Advanced Micro Devices surged 1 1/4 to 29 5/8.
* Buyers also continued to swarm around many industrial issues. DuPont rose 5/8 to 47 1/8, 3M jumped 1 5/8 to 108 1/2, Caterpillar rocketed 1 5/8 to 82 3/8, Cincinnati Milacron gained 1 1/2 to 24 5/8 and Phelps Dodge was up 7/8 to 48.
* Natural gas stocks also were strong. Sonat gained 1 1/2 to 68, Enron Oil & Gas jumped 2 to 48, Enserch rose 1/2 to 19 5/8 and KN Energy added 5/8 to 36 3/4.
* Among Southland issues, defense software firm Logicon surged 2 3/8 to 25 1/4 on analysts’ recommendations. But Magnetek fell 2 to 14 1/4 after Salomon Bros. downgraded the electrical equipment maker to “hold” from “buy,” citing problems in the firm’s lighting-ballast business.
Other Markets
The dollar sank to a new low against the yen on continued belief that Japan’s new government will not change the practice of running a large trade surplus.
The dollar closed at 103.64 yen in New York, down from Tuesday’s 104.70. The slide continued in early trading today in Tokyo, prompting midmorning intervention by the Bank of Japan.
Meanwhile, the dollar was strong against another major trade partner, Canada. The dollar hit its highest level against the Canadian dollar in five years, trading at $1.307 Canadian dollars, up from $1.293 on Tuesday.
Traders said the Canadian currency is being hurt by low interest rates in Canada, mixed economic reports and concerns about national elections later this year.
Elsewhere, light, sweet crude oil for September rose 36 cents to $17.88 a barrel in New York.
But metals prices plunged again. Gold for current delivery closed at $375.30 an ounce, off $5.60 on New York’s Comex. Silver dropped 8.1 cents to $4.67.
Market Roundup, D6
