Bonds End Flat, Awaiting Fed Chief

What happened to the big bond rally of 1998?

Interest rates closed mostly unchanged Wednesday, as the rally that had pushed long-term bond yields to 20-year lows earlier this month remained stalled.

In fact, yields have risen significantly from their lows reached in early January, when Asia’s crisis sparked a wave of buying by safe-haven-seeking global investors.

On Wednesday, the 30-year Treasury bond yield ended unchanged at 5.94%. But it has inched up in recent sessions and now is well above the two-decade low of 5.69% reached Jan. 12.

Among shorter-term securities, the Treasury auctioned new five-year notes at a yield of 5.56% on Wednesday. Five-year yields had bottomed at 5.23% on Jan. 12. The Treasury’s new two-year notes, auctioned Tuesday, sold at an average yield of 5.44%. Two-year yields were at 5.18% on Jan. 12.

Traders say yields have risen as safe-haven buying has ebbed, as Asia has stabilized. Also, many investors are dubious that the U.S. economy will slow enough this year to justify lower rates.

Federal Reserve Board Chairman Alan Greenspan will testify on Capitol Hill today on the economic outlook. If Greenspan suggests that worries about the global economy, and deflation, are receding, that could take more steam out of bonds.