Bonds seen enduring dollar woes: Yields are expected to stay steady or fall in wake of wild ride
NEW YORK -- The weak dollar has rattled the U.S. bond market, but many economists and money managers still believe long-term interest rates will remain steady or drop.</br></br>Very little of the dollar's decline is related to the types of economic trends that bond traders wring their hands about, analysts say. In fact, one thing the foreign-exchange traders have said they feared -- a slowing U.S. economy -- is a plus for the bond market. Slower economic growth reduces inflationary pressures, which lower the value of fixed-income investments.</br></br>After a wild ride on the back of the U.S. currency's fall to new post-World War II lows against the mark and the yen, the bond market has recovered to the levels occupied before the currency's slide.</br></br>Despite Friday's strong employment report for February, many bond investors remain convinced that economic growth has stopped accelerating and a major slowdown isn't far off. The government reported that the unemployment rate dropped to 5.4% of the work force in February from 5.7% in January; there was a jump of 318,000 in nonfarm payrolls.</br></br>The yield on the Treasury's benchmark 30-year bond finished Friday's session at 7.46%, compared with 7.51% late Thursday and 7.53% the previous Friday. The yield on the two-year note, meanwhile, ended last week at 6.80%, compared with 6.82% late Thursday and 6.87% one week ago. During the depth of the bond market's sell-off, the yield on the 30-year bond rose as high as 7.67% and the two-year note changed hands at 7.00%.