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Hedge fund sales hit bond
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October 22, 1998: 9:02 a.m. ET
Long bonds dip sharply; Soros said to be behind turn to short-term Treasurys
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NEW YORK (CNNfn) - Bond prices opened sharply lower Thursday on signs of hedge fund selling of long-term U.S. Treasurys in favor of shorter-term issues.
At around 9 a.m. ET Thursday, the benchmark 30-year Treasury issue was down 25/32 in price at 105-23/32, as the yield rose to 5.12 percent.
Bond traders cited speculation that a large hedge fund, said to be financier George Soros' Quantum Fund, was selling bonds to buy up the shorter-term two-year bills set for sale next week.
"The net-net is a steepening of the yield curve," said one bond futures trader, referring to a drop in longer issues while shorter-term Treasurys hold relatively steady.
The so-called "when-issued" T-bills are expected to go on sale next week, but early sales are permitted. Analysts said such a move to shorter Treasurys is not unexpected with recent trading volumes of bonds light.
"Considering the fact we have been thin or illiquid in some areas in the market it wouldn't surprise me if there had been some hedge fund selling," said Kevin Flanagan, a bond trader at Morgan Stanley Dean Witter, adding that he didn't know whether Soros was selling bonds.
The dip in bond prices came despite a report showing in unexpected rise in first-time jobless claims last week. Such a report would tend to indicate a slowing of the U.S. economy and thus be bullish for Treasury prices. 
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