Massive selling by hedge funds and a bearish signal out of the futures market sent bond prices sharply lower this morning. The yield on the benchmark 30-year Treasury bond briefly breached 6% at around 10 a.m. EST but has since recovered a bit. At about 11:35, its price was down 16/32 at 101 31/32, the yield at 5.98%.
The day's economic indicators are largely meaningless to traders. The biggest of the bunch, the government's first revision of fourth-quarter 1997
gross domestic product
, is old news. "It's a technical story here, not a fundamental story,"
strategist Mark Mahoney said.
A change in investor opinion since
Fed Chairman Alan Greenspan
delivered his twice-yearly
on Tuesday and Wednesday is behind the selling, market analysts said. Before the speech, many were betting that the Fed's next move would be to cut interest rates, and fairly soon.
"Since Greenspan spoke," said
analyst Ken Logan, "there's been a big shift in sentiment from the leveraged or risk-taking contingent" -- that is, hedge funds. Having gone "long in a big way," he said, "they're now trying to get neutral if not a little short."
The bearish signal out of the futures market was that with today's expiration of the March contract, making the June contract the front month, data on Thursday's weak session revealed a 30,000-contract drop in open interest. That indicates that up to 30,000 contracts were liquidated rather than rolled over.