clock menu more-arrow no yes

Filed under:


Bond prices plummeted and yields surged in a weeklong selling frenzy ignited by signs that a real economic rebound is finally beginning to emerge.

The market's bellwether security, the 30-year Treasury, which climbed two full points last week, fell 1-16/32 points. The issue's yield, which moves in the opposite direction of its price, climbed to 7.93 percent - its highest level since November.Bond investors do not like news of economic strength because they worry that a strong economy will lead to higher inflation and interest rates, trends that reduce the value of bonds.

Analysts said prices fell as players digested a string of strong economic reports, indicating the recession may be ending.

"An increasing number of monthly economic indicators suggested that some sort of recovery is beginning to take shape," said Allen Sinai, chief economist for the Boston Company Economic Advisers.

"The data did not show recovery yet. There are still lots of crosscurrents and risks, and many of the monthly indicators have shown up positive for just one month," the economist said.

But Sinai said there have been enough good economic reports to suggest that the previous "sideways-down tilt is now a sideways-up tilt."

"Fresh evidence that the economy is perking up chased bonds sharply lower," said Trude Latimer, market strategist at Josephthal Lyon & Ross.

"Last week bond players seemed to have found their sea legs, but this week they became rubbery over some good economic reports.'

During the week both government and private economic reports showed strength in the overall condition of the nation's economy.

The National Association of Purchasing Management said the manufacturing economy expanded in February at its fastest pace since October, while the National Association of Realtors said favorable financing conditions drove its housing affordability index to its highest level in 18 years.

The Commerce Department said its all-purpose construction spending index, paced by the new homes market, rose 1.3 percent in January, the biggest jump in 10 months.

Sales of new, single-family homes jumped 12.9 percent, while the Commerce Department's Leading Economic Indicators rose a strong of 0.9 percent in January, the first substantial increase in the index in six months.

The Labor Department, meanwhile, said non-farm payrolls rose a surprising 164,000. The civilian unemployment rate climbed to 7.3 percent - its highest level since July 1985.