Treasurys Slide on Demand Fears; Call by G-7 for Flexibility On Foreign-Exchange Rates Helps to Spark Steep Selloff
Dow Jones Newswires</br></br>NEW YORK -- Treasurys prices ended sharply lower, though well above the day's worst levels, on fears of less foreign demand for U.S. government securities.</br></br>Over the weekend, finance ministers of the world's seven largest industrialized nations called for "more flexibility in exchange rates . . . based on market mechanisms."</br></br>Asian central banks, notably the Bank of Japan and the People's Bank of China, have managed the valuations of their nations' currencies through covert market interventions and, in China's case, by a narrowly defined band. Bank of Japan interventions have involved buying dollars against yen, and many of the dollars accumulated through such purchases have been channeled into the U.S. Treasurys market.</br></br>Investors now fear that if the central banks were to refrain from buying dollars to keep their currencies weak, they would need to purchase fewer U.S. Treasurys.