Bond Prices Rally Partly on Speculation About Weaker U.S. Data on 3rd Quarter
NEW YORK -- Bond prices rose yesterday, erasing Monday's sharp declines, although trading volume was relatively light.</br></br>Prices of some 30-year Treasury issues increased nearly a point, or almost $10 for each $1,000 face amount. But most short-term interest rates wound up little changed.</br></br>The rally was fueled partly by speculation that government figures to be released today will show that the economy was weaker in the third quarter than had been expected. If so, that could arouse renewed concern that the economy is sinking into a recession, intensifying pressure on the Federal Reserve System to drive down short-term interest rates further.</br></br>Most analysts are expecting the Commerce Department today to report that the economy grew at about a 2.5% annual rate in the third quarter. That would be an improvement from the second quarter's dismal 0.6% rate, after adjusting for inflation. A few analysts even say third-quarter growth exceeded 3%.</br></br>But rumors swept through the markets that the report will show the economy grew at only a 1% to 2% pace. Several economists also predict that the economy will remain sluggish, at best, for the balance of the year and that interest rates will decline further.