Bond Prices Decline in Slow Trading In Reaction to Slightly Lower Dollar
Bond prices drifted lower in sluggish activity yesterday, reacting mainly to a slightly lower dollar in the foreign exchange markets.</br></br>"The bond market is trading strictly on currencies now," said Peter Bass, a managing director at S.G. Warburg Securities Inc. "This was one of the lightest trading days I can remember in a long while."</br></br>Prices of long-term Treasury bonds fell about half a point, or about $5 for each $1,000 face amount. Corporates, municipals and mortgage-backed bonds also edged lower, while most short-term interest rates were little changed.</br></br>Somewhat to the surprise of many traders, there was hardly any reaction in the credit markets to growing U.S.-Iran tensions stemming from the U.S. downing of an Iranian airliner Sunday. Several analysts thought investors might rush to sell long-term bonds and buy the safest of all securities, short-term Treasury bills. Some also thought oil and gold prices would surge. But that speculation proved unfounded.</br></br>"I don't think the bond market reacted to the airline disaster at all," said Robert A. Brusca, chief economist and senior vice president at Nikko Securities Co. International Inc. Instead, he said, bonds reacted mainly to "the dollar's failure to maintain its rise above the 135 level" against the Japanese yen in overnight trading.