Treasury bond prices fell Friday on growing fears that Bill Clinton would dramatically boost spending to energize the sluggish economy if he is elected president.
The price of the Treasury's main 30-year bond fell 3/16 point, or $1.88 per $1,000 in face amount. Its yield, which rises when prices fall, was 7.52 percent, up from 7.51 percent late Thursday.Clinton said at campaign stops Friday that he is studying new ways to "bump this economy" and if elected may try to speed federal spending on highways and other projects to create jobs.
"Bonds ran into a hurdle called fear of the deficit," said Susan Haring, a government bond economist with Salomon Brothers Inc. in New York. More spending would likely add to the federal budget deficit, which would force the government to increase borrowing and raise the supply of Treasury bonds.
Meanwhile, the government reported Friday that a sharp decline in exports led to the nation's worst trade imbalance in August in nearly two years. A separate report showed industrial production slipped for the third time in four months.
The anemic signs reassured bond investors that the Federal Reserve might move soon to lower interest rates again, which would help the value of bonds. In addition, a weak economy helps control inflation, which can erode bonds.
"The negative economic figures limited damage to the bond market," Haring said. "It's a tug of war between fear of the deficit and economic growth that stinks and there's no clear winner right now."
In the secondary market for Treasury securities, short-term maturities rose 1/32 point and intermediate maturities were mixed, ranging from unchanged to a a 3/32 point drop, the Telerate Inc. financial information service reported.
Yields on three-month Treasury bills fell to 2.95 percent as the discount fell 1 basis point to 2.90 percent. Yields on six-month bills were unchanged at 3.11 percent as the discount was unchanged at 3.03 percent.