Bond prices surge as report of weak retail sales for May renews concerns about economy
Weaker than expected retail sales figures for May blew the scent of recession back into the bond market yesterday, a worry that sparked one of the bigger one-day rallies of the past year.</br></br>The price of the 30-year Treasury bond rose nearly 2 1/4 points to 114 1/32, or about $22.50 for every $1,000 bond. The yield, which moves in the opposite direction of the price, fell to 6.54%.</br></br>Movement in the Treasury's two year note was even more dramatic. Its price which is roughly six times more sensitive to movements than the 30-year bond, rose nearly 5/8 of a point, while its yield fell 31 hundredths of a percentage point to 5.61%, its biggest one-day move in five years.</br></br>Traders, investors and economists said the weak retail sales figures for May -- a 0.2% gain compared with expectations of 0.6% -- confirmed suspicions about the economy's weakness. Moreover, they said once again Federal Reserve Board policy makers are under pressure to cut short-term rates soon.</br></br>"The fundamentals are now more positive [for a cut in rates] than when we had the weak unemployment numbers [on June 2]," said Lee Quaintance, head of government bond trading at CS First Boston.