Bond Prices Rise Slightly as Market Still Awaits News on Deficit Cutting
NEW YORK -- While a lower trade deficit report helped spark a strong stock market rally yesterday, the bond market reacted much less enthusiastically.</br></br>After an early morning surge, Treasury bond prices quickly ran out of energy, winding up with only small gains. Some actively traded issues ended with increases of less than a quarter of a point, or $2.50 for each $1,000 face amount.</br></br>"The biggest problem the bond market still has is the budget deficit," said Bruce R. Lakefield, executive vice president of Shearson Lehman Government Securities Inc. "Everyone has been watching the tape all day waiting for some results" to emerge from bipartisan talks in Washington.</br></br>Optimism about prospects for a deficit-reduction agreement rose Wednesday, and rumors swirled through the markets early yesterday that President Reagan was about to announce details. But administration and congressional negotiators drifted apart yesterday amid accusations by Democrats that the president had rejected the broad outlines of a proposed pact.</br></br>Although disappointment about the budget talks depressed activity in the credit markets, the Commerce Department's trade report encouraged many analysts. The nation's merchandise trade deficit shrank to $14.08 billion in September, slightly lower than the $15 billion gap that most economists in two surveys had expected. It also was lower than the $15.68 billion deficit in August.