Bond prices rise again

With U.S. stock markets not expected to re-open until Monday, Wall Street’s focus remained on the U.S. Treasuries market Friday where prices again rallied in the wake of this week’s devastating terrorist attack on the United States. As bond prices rose, yields on the 2-year notes sank to record lows on expectation the Federal Reserve would cut interest rates as early as Monday to protect the U.S. economy.

Trading in U.S. government securities resumed Thursday with many participants operating from back-up sites. Friday’s session, like Thursday’s New York trading day, is a shortened one, ending at 2 p.m. ET.

Bond prices rose again Friday, sending yields on 2-year notes plunging to new record lows, amid speculation the Fed would cut interest rates possibly as early as Monday in an attempt to halt the deepening economic gloom.

“Clearly foreign investors are freaking out and that shows up in the dollar breaking down and is also showing up in people selling stocks, bidding up gold and selling the dollar,” said Peter McTeague, Treasury market strategist, Greenwich Capital Markets. “In the bond market, it results in a steepening of the curve. The market is discounting slow growth.”

U.S. stock markets are set to resume trading Monday, ending a four-day shutdown — the longest since World War I — that followed a terrorist attack on the World Trade Center earlier this week. New York Stock Exchange Chairman Richard Grasso said Thursday that exchange officials plan to conduct a test of the market systems Saturday to be sure trading can proceed.

Grasso said no one supported resumption of trading over efforts to recover “those who are still with us that are trapped in the wreckage” of the World Trade Center buildings.