Treasury bond prices plunged more than a point and yields soared to three-month highs Friday as investor demand withered for a record $42.5 billion in newly auctioned securities.
Market analysts said Wall Street dealers who bid this week on the government's offering of three-, 10- and 30-year securities were having trouble reselling them to investors."The weight of the refunding is beginning to take its toll on the investment community," said Kevin Flanagan, money market economist at Dean Witter Reynolds Inc.
By day's end, the price of the Treasury's newly auctioned 30-year bond tumbled 1 3-32 points, or $10.94 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 6.97 percent from 6.91 percent at the bond's Thursday afternoon auction.
It was the bond's highest closing yield since hitting 6.99 percent May 12.
The Friday price decline accelerated a retreat that began Thursday afternoon after the Treasury Department sold $11.5 billion in fresh 30-year bonds, the final leg of the three-day quarterly refunding.
While the 30-year sale met decent demand from Wall Street securities dealers, the market crumpled in the aftermath as many investors apparently decided against buying the newly auctioned bonds and notes, analysts said.
Part of the market plunge was tied to technical factors: The bond yield soared through important thresholds and triggered selling by large investors such as mutual fund managers.
But the sharp retreat also reflected dashed hopes in the fixed-income market that the Federal Reserve will lower interest rates at its Aug. 22 monetary-policy meeting. Driving the pessimism are recent statistics showing that the economy may be rebounding from a slump earlier this year.