As Dow Sets High, Bonds Have Rally of Their Own
As the Dow Jones industrial average ended at a record high Tuesday, U.S. bond prices rose as expectations that a shrinking federal budget deficit will lead to less government borrowing helped spur demand at the Treasury’s sale of $13 billion in three-year notes.
“With the deficit coming down, it means we’ll see pretty small net borrowing,” said Donald Ross, director of fixed income at National City Corp. in Cleveland. “That’s pretty bullish for bonds.” Ross predicts that yields on the 30-year Treasury bond will fall to 5.5% in the months ahead.
As it was, the yield on the benchmark 30-year bond fell to 5.92% from 5.94% on Monday. The U.S. government sold the three-year notes at a yield of 5.414%, meeting expectations. Demand topped the average at the last 10 three-year note sales, based on the number of bids received compared with the amount of debt sold.
The Treasury will round out its quarterly debt auctions with a sale of $12 billion in 10-year notes today and of $10 billion in 30-year bonds on Thursday.
With the federal budget deficit vanishing and the government expected to post a surplus for fiscal 1999--the first such surplus in 30 years--the Treasury is likely to borrow less in the years ahead, making existing bonds more attractive. That should bolster demand at this week’s sales, analysts said.
In the stock market, the Dow ended with a gain of 115.09 points, or 1.4%, at 8,295.61, beating its Aug. 6 record close of 8,259.31.
In the broader market, advancing issues beat decliners 1,852 to 981 in heavy trading on the New York Stock Exchange.
The Standard & Poor’s 500-stock index also set a high, rising 8.27 points to 1,019.01. The Nasdaq composite index rose 18.61 points to 1,709.04.
Among Tuesday’s highlights:
* Among technology stocks, LSI Logic rose $2.25 to $27, Texas Instruments gained $2.13 to $55.75 and Intel rose 44 cents to $86.25.
* Duane Reade rose $5.06 to $21.56 on its first day of trading amid speculation that the drugstore company will be able to turn around years of losses or be acquired.
* Culligan Water Technologies soared $15.13 to $54 after it agreed to be acquired by U.S. Filter for about $60 a share. U.S. Filter fell $3 to $31.56.
Market Roundup, D12
* MAIN STORY: A1
