Bond Prices Rally as Volcker Remarks Indicate Steady Fed Policy to Traders
NEW YORK -- Bond prices rose sharply yesterday after Federal Reserve Board Chairman Paul Volcker expressed concern about sluggishness in the economy's manufacturing sectors.</br></br>Traders interpreted Mr. Volcker's remarks as an indication that the Fed won't tighten its credit policy. Some analysts say the Fed may even loosen its credit grip and push down interest rates in an effort to stimulate the economy.</br></br>Prices of some actively traded U.S. Treasury bonds surged more than a point, or more than $10 for each $1,000 face amount of securities. Most short-term interest rates fell.</br></br>The rally erased the sharp declines in bond prices registered Monday when the markets were jolted by the collapse of a small securities firm. The company, Bevill, Bresler & Schulman Asset Management Corp. in Livingston, N.J., was placed under bankruptcy-law protection. That aroused worry among some dealers that foreign investors, concerned about the U.S. financial system, might shy away from purchasing additional U.S. securities.</br></br>Mr. Volcker, speaking at a conference sponsored by the Export-Import Bank of the U.S., said he was concerned about "imbalances" in the U.S. economy. He pointed to the lackluster performance of several sectors, notably mining, manufacturing and agriculture.