Soaring Dollar, Falling Stocks and Commodities Lift Long Bond to New High

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Another day, another new record-low bond yield.

Driven, once again, by the dollar's ravaging of the Japanese yen, falling commodity prices and flight out of equities foreign and domestic, the benchmark 30-year Treasury bond is off to a strong start. At 11:10 a.m. EDT, the long bond's price was up 14/32 at 107, dropping its yield to 5.64%. The yield earlier touched 5.62%, a new low since the security was introduced in the late '70s. No major economic releases are scheduled for today.

"It's a microcosm of the last several months and weeks,"

A.G. Edwards

Treasury market strategist Bill Hornbarger said. "The dollar's up, commodities are down, equities are down and bonds are a safe haven."

Short-term bond yields, however, remain well above their historical best levels. While they've fallen below the 5.5% fed funds rate, the overnight bank lending rate set by the

Fed

, the Fed heads have made clear they're likelier to raise that rate than they are to lower it in the months ahead. That limits how far below fed funds investors are willing to buy. This morning, the two-year note's yield is 5.42%, the five-year's is 5.43% and the 10-year's is 5.40%.

Fueling bonds' rise this morning, dollar/yen is at a fresh eight-year high of 146.31, surpassing many a recent forecast. The yen's fall reflects the sorry state of Japan's economy, which on Friday officially went into recession on the news that its economy contracted for the second quarter in a row.

The yen's losing battle triggered stock market losses across most of Asia last night, and the losses have spread to most of the rest of the world this morning. All the European and Latin American bourses are off, as are U.S. stocks. The

Dow Jones Industrial Average

was lately down 58 at 8777.

And signaling fears of a global recession, commodity prices are dropping to new lows, helping bonds by improving the already stellar inflation outlook. Led by oil (July crude is down 45 cents at $12.14 per barrel), the

Commodity Research Bureau Index

is down 1.68, or 0.8%, to a new low of 208.58.