Bond Yields Fall Near Record Low

Bond prices rose Friday and yields flirted again with all-time lows as Asia’s worsening financial problems boosted optimism for a slowdown in U.S. economic growth and continued low inflation.

The deepening Asian crisis prompted investors to bail out of the stock market and seek refuge in U.S. Treasuries, considered a safer investment in times of low inflation and uncertainty about corporate profits. Foreign investors also were spurred to buy U.S. Treasuries for safety.

The Asian developments overshadowed a report that showed a stronger-than-expected jump in job creation last month, which suggests the labor market still could pose an inflationary threat.

“The bond and money markets threw their customary caution to the wind in the face of growing uncertainty regarding the ongoing turmoil in the Asian financial markets,” said Stephanie Davis, an analyst at Technical Data in Boston.

The price on the benchmark 30-year bond rose 1/4 point, or $2.50 per $1,000 in face value. Its yield, which moves in the opposite direction, slipped to 5.73 percent from 5.74 percent late Thursday.

The yield on the long bond recovered from a low of 5.69 percent - below the 5.71 percent all-time low set three days ago when investors became ebullient regarding the possibility the central bank might ease interest rates to prevent deflation.

The yield first moved to a new closing low on Monday, shattering the previous record of 5.79 percent on Oct. 15, 1993. The government has been selling the 30-year bond since 1977.

Bond prices sank earlier in the day, pushing the yield as high as 5.81 percent, after the Labor Department said 370,000 jobs were created in December. Many economists had expected growth of about 150,000 to 200,000.

The increase brought U.S. payrolls to 123.9 million. That’s 3.2 million more than a year earlier, the largest number of jobs created since payrolls grew by 3.9 million jobs in 1994.

But the strong job creation was tempered a bit by an increase in the unemployment rate and just a small rise in wages, which suggests that tight labor conditions aren’t pushing up the inflation rate.

For months, economists had been expecting growth-dampening interest-rate increases from the Federal Reserve, which feared low unemployment would push wages higher, encouraging consumer price inflation.

Normally, such unexpected strength in the monthly jobs report would be enough to rekindle those worries in the minds of bond investors. But the problems in Asia and a plunge in stocks outweighed any concerns.

The Dow Jones industrial average plunged 222 points as a third straight day of steep market declines in Southeast Asia dashed hopes of an easing of the economic crisis in that region.

“The feeling is that the situation in Asia is just going to be quite a bit longer in sorting itself out than many had hoped,” said Robert Giordano, manager of Treasury securities at Bank Leumi Trust Co. of New York.