Volume Light as Treasuries, Commodities Reopen Trading

New York's Financial District was still under rubble Thursday morning but the nation's capital markets crept back to life.

Treasury bonds became the first securities to change hands on a U.S. market since terrorists destroyed the World Trade Center and many investment firms on Tuesday. Commodities also resumed trading on a limited basis at the Chicago Board of Trade and Chicago Mercantile Exchange.

Two-year notes rallied, their yield falling to about 3%, while the benchmark 10-year bond swung in a full-point range amid concerns about insurance losses and the impact of the explosion on the U.S. budget and economy. Investors sought a safe haven in the short end, particularly with no definitive word on when stock trading would resume.

Volume in the bond markets was extremely low, although there was solid action in interest rate futures such as eurodollar and Fed funds contracts. With the Treasury Department promising easy access to liquidity and the impact of the dister on the economy still unclear, trading in October Fed funds futures implied expectations of a quarter- to half-point cut in interest rates. The Federal Open Market Committee next meets Oct. 2.

Overseas, stocks were modestly higher in volatile and heavy trading in Europe, while Asian markets that were open for their second day rose. The European Central Bank met Thursday and decided, as expected, to leave rates unchanged. The ECB benchmark is currently 4.25%. The dollar was unchanged against the pound and higher against the yen.

Equity market officials were meeting in New York again to formulate a definitive timeline for the resumption of stock trading. On Wednesday, Richard Grasso, the chairman of the New York Stock Exchange, said the exchanges would open Friday at the earliest, but probably not until Monday.

"We are still in the recovery phase," Grasso said. "There are still people trapped in that wreckage and we have to be very careful to make sure that nothing we do in any way interrupts the efforts ot the brave men and women who are at that site."

Efforts to remove debris from Lower Manhattan continued Thursday morning and access to the area was limited to emergency vehicles. The NYSE, which is located about two blocks east and two blocks south of where the Trade Center stood, was cordoned off, and officials remained concern about a myriad of issues, including safety, access and the communications infrastructure.

Some market players worried the damage would lead to unfair advantages both in access to prices and physical infrastructure. Art Hogan, a strategist with Jeffries, said any major inequalities would result in a halt in trading.

"Having all of us using the New York Stock Exchange as a pricing mechanism is one thing that handicaps all of us. We're all sort of dealing with the same thing as far as the pricing mechanism and the central marketplace," Hogan said. "If the market's open, those prices are going to be good."

The U.S. government released its first major economic indicator since the terrorist attack, saying new unemployment claims rose 21,000 to 431,000 in the week of Sept. 8.