Eight days of rapidly climbing stock prices and falling oil prices had a major impact on the bond market. By the end of trading Friday, yields on 10-year Treasury notes were up 52 basis points, to 4.10 percent, and those on five-year notes rose 57 basis points, to 3.08 percent. Analysts had warned for some time that the bond market appeared to be in an "overbought" condition, and that once it was clear there would be war with Iraq yields would start to shoot up. Meanwhile, Federal Reserve officials, as expected, left their target for overnight interest rates unchanged at 1.25 percent when they met last week. But the officials indicated that they stand ready to reduce rates if financial markets have an adverse reaction to the war, though there is no sign of that so far.
Tomorrow, Treasury will sell $17 billion each of three- and six-month bills, which yielded 1.17 percent and 1.20 percent, respectively, in when-issued trading Friday. Also tomorrow, Treasury will announce details of an auction of four-week bills to be held Tuesday and of a sale of two-year notes to be held Wednesday.
-- John M. Berry