Weakened Dollar Can't Help Bonds

The dollar has slipped under 104 yen again, and Treasuries are modestly weaker in response.

Author:: David A. Gaffen
Publish date:: Sep 22, 1999 11:57 AM EDT

It's quiet dealings in the Treasury market this morning. Bond prices were close to unchanged until the dollar began weakening around 11 a.m. EDT, but volume is low, seeing as how there are no major economic releases this morning, and

Fed

officials won't be speaking until after the market's close.

Lately the 30-year Treasury bond was down 3/32 to trade at 100 12/32. The yield edged up to 6.10%. Tracker

GovPX

reported trading as of 10 a.m. EDT down 32% compared with the average Wednesday in the past month.

The market's has had only a modest reaction to headlines stating the

International Monetary Fund

believes the Fed's been slow to react to the overvalued stock market. The dollar has weakened since headline summaries of the IMF's

World Economic Outlook

appeared on wires, and that's cutting into the bond market. The IMF

said the Fed should raise rates again before the year-end and then remain on hold after that.

Dollar/yen was lately down 0.82 to 103.96. The dollar sold heavily against the yen yesterday after the

Bank of Japan

elected not to weaken the yen by flooding the banking system with money. Previous interventions have proved ineffective.

The Federal Reserve's

Beige Book

, a rundown of economic conditions throughout the nation, as surveyed by the 12 Fed districts, is released at 2 p.m. Generally this report has little influence on the market, seeing as it's an informal reading of economic conditions, but in June the

report warned of rising wage pressures in most sections of the country, a contrast to government data. The Fed raised rates two weeks later.

The

Treasury Department

will release the federal budget statement at 2 p.m. Forecasts as polled by

Reuters

expect the U.S. ran a $6 billion deficit for the month of August, which would decrease the fiscal 1999 surplus to $63 billion. September, a month when the government usually runs a surplus due to tax receipts, is the last month of the fiscal year. The federal government should end in the black for the second straight year.

High Frequency Economics'

Ian Shepherdson estimated a surplus of $110 billion, but said in a comment that "it's a significant forecast error" from the

Congressional Budget Office's

$120 billion forecast projected "as recently as July."