T-Bonds Down the Limit

CHICAGO — Treasury bond futures plunged the limit allowed for daily trading at the Chicago Board of Trade on Wednesday, socked by a large dose of profit taking.

Bond prices have been rising steadily for weeks, with the contract for delivery in March soaring from 84 points about a month ago to close at 98 before falling back to 94 6/32 on Wednesday. Partial points are expressed in 32nds.

“This was a $14,000 move in just four weeks,” said Gary Dorsch, an analyst with G. H. Miller & Co.

So the setback Wednesday “was just a bit of a technical correction, even though a severe one,” he said.

All contracts settled 2 points lower, with the March delivery, on which there is an expanded limit, down 2 16/32 at one point.

Bonds were under pressure from profit taking and the belief “that the Federal Reserve will leave its credit policies unchanged for the near term,” Dorsch said.

There are a lot of conflicting rumors in the market on whether West Germany will cut its interest rates this week, but Dorsch said he believes that it will be forced to lower the rates “to prevent a free-fall in the dollar.”