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Bonds edge lower Treasurys slip amid rate hike fears, strong commodities; dollar weakens
By Staff Writer Jill Bebar
January 20, 2000: 3:59 p.m. ET NEW YORK (CNNfn) - Treasury bonds ended lower Thursday as continued fears of rising interest rates and soaring commodity prices, notably oil, pressured the market.
Although bonds had recovered some early losses amid reports of asset allocation out of stocks into Treasurys and following the release of a tame Philadelphia Fed survey, sentiment remains negative.
"The bond market remains quite bearish. The economic news did not change anyone's mind about the Fed raising rates," said Tony Crescenzi, senior market strategist at Miller Tabak Hirsch & Co.
Just before 3:15 p.m. ET, the price of the benchmark 30-year bond fell 4/32 to 92-7/32. Its yield, which moves inversely to its price, rose to 6.73 percent from 6.72 percent Wednesday.
The latest batch of economic news that showed the economy growing rapidly and the labor market remaining tight did not alleviate rate hike fears. Analysts strongly expect the Fed to increase interest rates by a quarter percentage point at its next meeting Feb. 1 and 2. Many also forecast another hike at the following meeting, March 21.
The U.S. trade deficit widened to a record $26.5 billion in November from a revised $25.5 billion the previous month. The number was nearly $1 billion above economists' estimates of a $25.9 billion gap, with both imports and exports rising, suggesting the economy remains strong.
In other economic news, U.S. jobless claims fell to 272,000 in the week ended Jan. 15, well below estimates of 295,0000, suggesting the labor market continues to tighten. Oil prices surge
Investors expressed nervousness about surging oil prices after OPEC recently announced it will continue to limit production. In New York, February crude oil futures last traded at $29.30 a barrel.
Along with strong commodities, corporate and agency supply issuance weighed. A $3 billion World Bank issuance in the five-year sector pressured intermediate securities. Corporate and agency bonds are considered attractive as their higher yields could draw investors from Treasurys.
But underpinning Treasury prices was the Philadelphia Fed survey, which measures manufacturing in the region. The overall index fell to 9.1 in January from 15.1 in December. The closely watched prices paid component also fell, to 21.9 from 23.7.
Jim Glassman, chief U.S. economist at Chase Securities, was optimistic. He told CNNfn bond yields may have peaked. (367K WAV) (367K AIFF) Dollar weakens
In the currency markets, the dollar fell slightly against both the Japanese yen and the euro Thursday.
Just before 3:15 p.m. ET, the dollar changed hands at 105.28 yen, down from 105.34 Wednesday, a 0.06 percent loss in the dollar's value.
Meanwhile, the euro rose to $1.0167 from $1.0123 Wednesday, representing a .0044 percent decline in the dollar's value.
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