Magazine article American Banker

Rates Drop, Bonds Surge on Inflation News

Magazine article American Banker

Rates Drop, Bonds Surge on Inflation News

Article excerpt

Interest rates plunged on Wednesday, as government bonds rallied on more good news on inflation.

The yield on 30-year Treasury bonds sank to a record low of 6.56%, from 6.61% on Tuesday.

Intermediate Treasuries also got support from buying by municipalities, which back future refundings with U.S. government issues - a practice known as defeasance.

The yield on 10-year Treasuries fell to 5.71% from 5.77%. Two-year notes yielded 3.97%, down from 3.99%.

Stocks rallied on the lower interest rates. The Dow Jones industrial average jumped 27.11, to 3,542.55. The Standard & Poor's 500 index gained 1.99, to 450.08. The Nasdaq composite index jumped 4.02, to a record 712.49.

The dollar fell, because low inflation in the United States makes a tightening by the Federal Reserve unlikely. Late Wednesday afternoon in New York, the dollar was at 1.7155 German marks and 107.05 Japanese yen, down from 1.7185 marks and 108. …

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