Treasury Prices Climb Sharply on Fresh Signs of Weak Economy, Auguring a Fed Rate Cut
NEW YORK -- Prices for U.S. Treasurys jumped sharply yesterday as data suggesting continued weakness in the economy convinced investors that the Federal Reserve is likely to cut short-term interest rates today after the release of the September employment report.</br></br>While Ross Perot's announcement late yesterday that he would re-enter the presidential race pushed the stock market down, the bond markets showed little reaction. Investors were more focused on economic reports released in the morning that suggested that the economy continues to be weak.</br></br>"The numbers we saw this morning were overwhelmingly weak," said Joel Kazis, head of government trading at UBS Securities, a subsidiary of the Union Bank of Switzerland. "The economy is no longer treading water," added Mr. Kazis, "it's slipping further."</br></br>Corporate treasurers rushed to market with about $2.4 billion of new issues in order to take advantage of the low interest rates and avoid being lost in a crowd of new deals expected in the next week.</br></br>Mortgage-backed securities posted smaller gains than Treasurys as surging prepayments on home mortgages weighed prices down. The 7% issue of Government National Mortgage Association bonds, for example rose 1/2 point to 99 5/32 for a yield of 7.19%.