30-year bond yields close at 7.49% in hectic trading

May 14, 1994|By Bloomberg Business News

NEW YORK -- U.S. government bonds rallied yesterday in hectic trading after a government report showed inflation remains subdued.

The benchmark 30-year bond's yield fluctuated between 7.46 percent and 7.60 percent before closing at 7.49 percent, down from 7.56 percent at Thursday's close. On Wednesday, the yield reached 7.66 percent, the highest since Nov. 11, 1992.

"We have no inflation," said Jane Wyatt, chief investment officer at Voyageur Asset Management, a Minneapolis-based firm with $6.2 billion in assets. "I don't see any reason [bond yields] couldn't be a full point lower -- easily."

The Labor Department said yesterday that consumer prices rose 0.1 percent in April, less than expected.

Bond yields plummeted in the morning, then shot back up before noon amid concern that low inflation won't last, and as the major bond firms unloaded the $29 billion in notes the Treasury sold this week. Traders and investors also are concerned about whether, and how much, the Federal Reserve may raise rates next week.

Bonds are having trouble holding gains because some traders and investors think the inflation rate is bound to rise as the economy expands. A rising inflation rate diminishes the value of fixed-income securities. "People still think we're in a rising interest-rate environment and any meaningful rally you should sell," said Timothy "Woody" Jay, head of government bond trading at Lehman Bros.

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