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Treasury bond prices slumped on Friday as investors interpreted comments by Federal Reserve Chairman Alan Greenspan to mean the central bank won't be cutting interest rates soon.

The Treasury's 30-year bond, which rallied Thursday, dropped 5/8 point, or about $6.25 per $1,000 in face amount.Its yield, a sensitive indicator of inflation trends and long-term interest rates, rose to 6.35 from 6.30 percent on Thursday. Prices and yields move in opposite directions.

In two speeches less than 24 hours apart, Greenspan said the Fed remains vigilant on inflation and the economy appears to be in balance. Both would suggest that the chairman sees no reason for a rate cut at the next Federal Open Market Committee meeting in November.

After more than a year of rate increases meant to slow down a too-fast economy, the Fed cut rates in July to combat sluggish growth and a so-called "inventory recession," which occurs when factories slow production down to shed unwanted inventory buildup.

Many bond strategists have been expecting the Fed to continue easing rates, and factored a rate cut into the price they're willing to pay for Treasuries.

But in a speech Thursday night before the Chicago Economists Club, Greenspan warned that there's no guarantee that inflation can be held at bay.

That sent bond prices lower in active trading during the morning session, as investors reasoned that if Greenspan thinks inflation is looming, the Fed would be unlikely to cut rates to stimulate the economy and run the risk of fostering inflation.

"Any hopes for a near term easing are evaporating," said Dan Seto, economist at Nikko Securities International Co.

Investors fret at any suggestion that inflation could flare up because it erodes the value of fixed-income securities such as Treasuries. Lower interest rates help stimulate the economy.

In a speech at noon Friday before the National Italian-American Foundation, Greenspan said that inventories have become less of a drag on the economy. Though his comments seemed to contradict what he said Thursday, bond strategists took them to mean that the economy has achieved a certain balance - moderate growth with low inflation - which reinforced the notion that a rate cut is unlikely.

"People who were holding out then figured that no chance he's going to ease," said Richard Hollocher, a government trader at A.G. Edwards & Sons Inc. in St. Louis.

Othe factors adding to the negative tone Friday included the prospect of new supplies of 2- and 5-year notes coming into the market next week. Investors sell some holdings to make room for new bonds.

Another cloud on the horizon is next week's gross domestic product report for the third quarter. Some economists have projected a strong number, which would be further evidence that rates will remain steady for the time being.