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Treasurys prices soar
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July 20, 2000: 3:37 p.m. ET
Greenspan's testimony soothes interest rate woes; dollar falls against euro, yen
By Staff Writer Jill Bebar
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NEW YORK (CNNfn) - Treasury securities rallied Thursday after remarks by Federal Reserve Chairman Alan Greenspan fueled optimism that the central bank will not hike interest rates aggressively in the near term.
In the currency markets, the dollar fell sharply against both the euro and the yen amid expectations of a less aggressive Fed.
Shortly after 3 p.m. ET, the 10-year Treasury note, considered the market benchmark, was up 1-3/32 points in price to 103-17/32. The yield, which  moves inversely to the price, fell to 6 percent from 6.14 percent late Wednesday.
The 30-year bond gained 1-16/32 points to 106-4/32, its yield retreating to 5.81 percent from 5.92 percent.
In prepared remarks to the Senate Banking Committee, Greenspan acknowledged that the U.S. economy was showing signs of slowing and reiterated concerns about inflationary pressures.
Because investors were anticipating hawkish testimony, investors expressed relief. "Greenspan's testimony suggested the Fed won't necessarily raise rates as early at the August meeting," said Jeff Palma, U.S. economist at UBS Warburg.
The fed funds futures contract, which gauges market expectations for where rates will go, was now suggesting around a 34 percent probability of a  quarter-percentage point tightening at the August meeting, compared to a 50 percent likelihood prior to Greenspan's testimony.
Renewed worries about higher interest rates in the coming months had put pressure on Treasurys in the previous four sessions. The Fed raised short-term interest rates six times in the last year. Policy officials meet again on Aug. 22.
Michelle Girard, strategist at Prudential Securities, told CNNfn's Ahead of the Curve she expects any gains in the financial markets to be limited in the near term until the Fed meeting is out of the way. (265K WAV) (265K AIFF)
Housing starts lifts prices
Earlier in the day, a report of the housing sector also helped Treasurys. U.S. housing starts fell 2.6 percent to a 1.554 million annual rate in June, the lowest level in more than two years, the Commerce Department said. The data provided further evidence that the economy is cooling.
Meanwhile, the Treasury repurchased $1.5 billion of 30-year bonds with maturities between February 2021 and August 2023. The average maturity of the securities was 21.3 years and the average yield was 6.186 percent.
The operation was the ninth leg of the government's ongoing buyback program to retire $30 billion of some older, long-term debt this year. So far, it has repurchased $16.5 billion.
In other economic news, the Labor Department said U.S. jobless claims fell 9,000 to 311,000 in the week ended July 15.
Dollar tumbles
On the heels of Greenspan's testimony Thursday, the dollar declined against the major currencies as traders re-evaluated central bank interest rate expectations.
The euro regained momentum against the dollar amid expectations that the European Central Bank will raise rates faster than the Fed. "The prospect of only moderate rate tightening in the future diminished some of the  dollar's interest rate appeal," said Alex Beuzelin, senior market analyst at Ruesch International.
The ECB kept interest rates steady at 4.25 percent at its policy meeting Thursday, in line with expectations.
Shortly after 3 p.m. ET, the euro was trading at 93.24 cents, up from 92.47 cents Wednesday, a 0.8 percent loss in the dollar's value. The dollar was at 107.67 yen, down from 108.23 yen Wednesday. 
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