Treasury Bond Prices Slump With Fall In Dollar's Value and Rise in Oil Price
NEW YORK -- Prices of Treasury bonds slumped yesterday as dealers and investors were shaken by a sharp drop in the U.S. dollar's value against other major currencies.</br></br>Some actively traded U.S. government bonds fell more than half a point, or $5 for each $1,000 face amount. Interest rates declined at the weekly auction of Treasury bills, but most other short-term rates rose.</br></br>Adding to investor jitters was a rise in the price of oil. Prices of gold and other precious metals viewed as harbingers of inflation also rose.</br></br>"Investors are growing increasingly concerned that the dollar's weakness could make foreigners reluctant to buy dollar-denominated securities," said Maury N. Harris, chief economist at PaineWebber Inc. Foreign investors have purchased large amounts of Treasury bonds in recent years, helping the U.S. government finance its huge budget deficits.</br></br>Furthermore, a continued drop in the dollar might rekindle inflationary pressures and cause the Federal Reserve not to ease credit, some investment managers say. Analysts generally have been expecting the Fed to drive interest rates lower to try to to stimulate economic growth.