Long-term interest rates reach new lows as the bond rally resumes.

After a one-day respite, the bond market rally resumed on Wednesday, sinking long-term interest rates to new lows.

Stocks soared, with the Dow Jones industrial average and Nasdaq composite index setting records. The dollar was mixed.

The yield on the 30-year bond flirted with 6.25% but met resistance at that level. In late trading, the bond yielded 6.26%, down from 6.31 % on Tuesday.

Impetus from Japan

Rate changes were less sharp in the intermediate sector.

Ten-year notes yielded 5.68%, off 2 basis Points; five-year notes yielded 5.03%, down 3 basis points; and two-year notes yielded 3.96%, down 2 basis points. The bond-equivalent yield on three-month Treasury bills was 3.04%, down 2 basis points.

John Canavan, market analyst at Stone & McCarthy Research Associates, said good bidding in Japan overnight provided a firm tone for the market, causing U.S. dealers to cover shorts set up during Tuesday's drop in bond prices.

Treasury Issue Expected

He said the market also was aided by reports that municipalities had bought about $1 billion in Treasuries and unconfirmed rumors that the Federal Reserve was quietly buying Treasuries.

The gains came despite the prospect of new issuance by the Treasury next week. The Treasury said it will sell $16 billion of two-year notes on Tuesday and $11 billion of five-year notes on Wednesday. These amounts were unchanged from July.

Strength in consumer issues again bolstered stocks. Pharmaceuticals gained after Roger Altman, deputy Treasury secretary, said he did not expect the White House health care plan to include mandatory price controls.

The Dow gained 17.88 points to 3,604.86. The Standard & Poor's 500 rose 2.91 points to 456.04, just shy of the record 456,33 set in March. And the Nasdaq composite index advanced 3.81 points to 734.82.

In late New York trading, the dollar was at 101.55 yen, up from 101.10 on Tuesday, and at 1.6795 German marks, down from 1.6931.

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