Long-Term Rates Top 7% as Commodity Prices Surge
Fraust, Bart, American Banker
Long-term interest rates jumped past 7% on Tuesday as the bond market fretted over new signs of inflation.
A sharp rise in the prices of gold and other commodities provided the latest jolt. Commodity Exchange gold futures rose $8, to $376 an ounce.
The Commodity Research Bureau Index, measuring 21 futures prices, rose 1.69 point, or 0.81 percentage point, to 210.60.
Demand for gold and other precious metals picks up when investors fear inflation will eat into the value of bond holdings. Last week's government reports showing surprisingly strong increases in consumer and producer prices have sparked an inflation scare in the financial markets.
In late New York trading, the price of the government's 30-year bond was down 3/4. This raised the yield, a benchmark for bank loan rates, to 7.02% from 6.96%. The yield has soared almost a quarter percentage point in the last week.
Kevin Flanagan, money market economist at Dean Witter, Discover & Co. …