Prices of Bonds Decline Sharply In the Afternoon --- Slump Leaves U.S. Issues Close to Lows for 1987; Stocks Drop 44.60 Points
NEW YORK -- Bond prices fell sharply yesterday afternoon, partly reflecting renewed inflation fear and continued nervousness that the dollar will weaken further.</br></br>The slump wiped out nearly all the gains registered in the previous two sessions and left actively traded U.S. Treasury bonds close to their lowest levels of the year. Some long-term Treasury issues dropped about one point, or $10 for each $1,000 face amount, while their yield rose to nearly 8%. Since March 26, Treasury issues have plummeted almost 4 1/2 points, or $45 for each $1,000 face amount.</br></br>Investment managers attribute most of the deep slump to concern about the dollar's sharp drop in the foreign-exchange markets. Although the dollar was narrowly mixed yesterday, inflation fear resurfaced because prices of some closely watched commodities rose. And the bond slump contributed to a big decline in stock prices, with the Dow Jones Industrial Average plunging 44.60 points, to 2360.94.</br></br>"The bond market just unraveled in the afternoon," said Robert A. Brusca, a senior vice president at Nikko Securities Co. International. "There is a strong sense of greater inflation down the road." He and several other analysts also expressed skepticism about the ability of the U.S. and its leading trading partners to bolster the dollar. "People are voting with their bonds, and their vote is to sell," Mr. Brusca added.</br></br>Shearson Lehman Brothers Inc.'s index of long-term Treasury bonds tumbled 13.44 points, the third largest decline this year. The index ranged between 1372.42 and 1386.74, winding up at 1373.98.