30-year bond's yield continues to skid Heavy buying surprises dealers

September 03, 1993|By New York Times News Service

NEW YORK -- The yield on the 30-year bond continued its relentless march downward yesterday, creeping closer to the 6 percent mark and apparently catching some traders off guard.

On a day that many expected to be quiet because of the cautious trading that usually occurs ahead of the Friday release of the monthly employment data, bond dealers were suddenly faced with heavy retail buying as portfolio managers of all kinds swooped in and bought the 30-year bond and other Treasury securities.

"I think that people realize that there is the potential for a big move down in yields," said Matthew Alexy, the government trading strategist for First Boston Corp.

The yield on the 6.25 percent, 30-year bond due in August 2023 dropped to 6.04 percent, from 6.08 percent on Wednesday, as the price, which moves in the opposite direction, rose 20/32. Before trading trailed off in the late afternoon, the yield had fallen to 6.03 percent.

Another day like yesterday, when the price jump was not unusual, would push the yield on the 30-year bond down to 5.99 percent, which would be the lowest yield on long-term debt in more than 20 years.

Mr. Alexy said he believed that the 6 percent barrier would be breached today because he expected the employment data for August to be weak. He predicted an increase in nonfarm payroll jobs of 125,000.

"We saw significant retail buying today [Thursday]," Mr. Alexy said. "These are not flippers. Their buying expressed the view that interest rates can move down several basis points" or hundredths of a percentage point.

The yields on the other Treasury securities also fell, as data released yesterday shows the economy may be weaker than many forecasters had expected in the third quarter.

The price of the three-year note rose 3/32 as the yield dropped to 4.14 percent, from 4.16 percent the day before. That was just shy of its 4.11 percent low for the year, which was hit in May.

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