Bonds Rally as Stocks Continue to Plummet
U.S. bonds staged a late-day rally Monday, rounding out the best month for bonds since May 1995, as stocks plunged anew.
“Money is moving into the bond market from all over the world,” said William Dawson, who oversees about $76 billion in bonds at Federated Investors in Pittsburgh.
The 30-year Treasury bond’s price rose $10.64 per $1,000 face value, pushing its yield down to a record low 5.27% from 5.33% on Friday. But shorter-term yields were mostly unchanged.
Investors have snapped up Treasuries in recent weeks as a refuge from turbulent financial markets worldwide.
“Everyone just wants Treasuries, you’re seeing that in all markets,” said Bob Laskowski, who manages about $220 million in bonds for the China Trust Bank. He expects yields to fall further.
The 30-year U.S. Treasury bond’s “total return” in August--that is, interest earned, plus price appreciation--was a stunning 7.3%. That’s the best since the bond gained 9.3% in May 1995.
Year-to-date, the 30-year T-bond’s total return is 13.9%. By comparison, the Dow Jones industrial average now has lost 4.7% year-to-date on a price basis.
Many analysts say bond yields are signaling that a serious economic slowdown is in the offing--which would result in the Federal Reserve Board reducing its benchmark short-term interest rate, the federal funds rate, which still is at 5.5%.
Meanwhile, the rush into bonds continued in Tokyo today, where the yield on Japan’s 10-year government bond fell to 0.995%--its lowest ever, and perhaps the lowest in the history of bond markets.
Web Site Traffic Jams as Trading Soars
Financial sites around the Web were slowed Monday as heavy trading in a sinking market swamped Web servers.
With the increase in trades on the market’s second-busiest day came traffic jams on the Web as financial sites offering news and transactions were inundated by investors looking for information.
The producer of Yahoo’s finance section, Mike Riley, said Monday was the site’s biggest day of traffic ever, but he couldn’t provide specific numbers. He said the popular site saw an even greater spike in visitors than at the end of October last year, when the market slid and rallied in a two-day roller-coaster ride.
Lisa Nash, a vice president at E-Trade, an online brokerage, said the company “had a bit of a slowdown” sometime in the afternoon. She also declined to give out specific numbers, but said the volume traded was “solidly” ahead of the company’s daily average volume.
Riley blamed the Web-wide slowdown on the number of people flocking to the Net for news of the market. “On big market days, Internet traffic increases a lot,” he said. “And you do get bottlenecks on the Internet.”
Online stock trading has grown tremendously in a short time. Forrester Research of Cambridge, Mass., reported there were 3 million online accounts for stock trading in 1997. The research firm expects that number to top 14 million by 2002.
‘Mighty’ Dollar Loses Some of Its Potency
So much for the strong dollar.
The greenback fell to a nine-month low against the German mark and a six-week low against the yen as U.S. stocks plunged.
“The dollar is following the stock market,” said James McGroarty, portfolio manager at Orbitex Management Inc., an investment advisory firm.
In late New York trading, the dollar fell to 1.75 marks from 1.76 Friday. Earlier, it sank to 1.73 marks, its lowest level since Nov. 24.
The dollar also tumbled to 140.78 yen from 141.85 Friday. It touched an intraday low of 138.83 yen, the lowest since July 20.
The dollar initially soared against the mark Monday on new signs of political disarray in Russia then reversed as Wall Street stocks collapsed.
A weak dollar raises worries because it could trigger liquidation of U.S. assets by foreign investors--who own an increasing chunk of our markets.
Market Slump Takes a Physical Toll
At least two Wall Street workers suffered heart attacks Monday, amid the market’s plunge.
NYU Downtown Hospital, the nearest medical center to the trading floors of Manhattan’s financial district, said it treated the heart attack victims.
“It’s a little more than a normal day,” said Susan Lau, a hospital spokeswoman. She said both were in stable condition and under observation Monday evening.
Compiled from Wire Reports and Times Staff
