Treasuries rally as stronger dollar supercedes GDP expectations.

Normally, a rumor that the Commerce Department will report stronger-than-expected growth for the second quarter would drag the bond market down, but not in yesterday's currency-driven session.

Most economists expect the government to report today that the nation's gross domestic product grew 3.5% to 3.8% in the second quarter. But rumors circulating yesterday that the number will be as high as 6% pushed up the dollar against the yen. The higher second quarter growth rate could force the Federal Reserve Board to again raise short-term interest rates, bolstering the U.S. currency.

The dollar was also pushed higher by expectations of positive developments from trade negotiations between U.S. and Japanese officials tomorrow. U.S officials had set a deadline of July 31 for resolving the impasse regarding Japanese government purchases of telecommunications and medical equipment.

In late New York trading, the dollar was quoted at 100.03 Japanese yen, the highest point in more than a month and above the psychologically significant 100-yen mark. Earlier in the day, the dollar had been as high as 100.15 yen.

The dollar's rally, in turn, provided sustenance to the Treasury market.

The benchmark 30-year bond finished the day up 19/32 to yield 7.54%. The ten-year bond moved up 13/32 to yield 7.27%.

At the short end, the yield on the three-month bill dropped three basis points to 4.51%. The yield on the six-month bill rose one basis point to 5.02%, and the one-year note yield fell three basis points to 5.52%.

In the debt futures market, the September Treasury bond contract moved up 21/32 to 103.

In early trading yesterday, the 30-year bond fell 2/32. The drop came after a Labor Department report that new jobless claims fell 59,000 to 331,000 for the week ending July 23, the lowest number since March 26. The market had expected a drop of about 30,000 claims.

Corporate Securities

Spreads on investment-grade issues widened slightly, as corporate bonds failed to keep pace with the Treasury market. Below investment-grade bonds were mixed in quiet trading.

Standard & Poor's Corp. and Moody's Investors Service confirmed their ratings of Shell Oil Co. yesterday. The rating agencies moved to reassess ratings on $4.6 billion of debt issued by Shell following the company's announcement that it would double the dividend on its common stock.

Standard & Poor's reaffirmed its triple-A and A-1-plus ratings and said its credit outlook for the oil company is stable.

Moody's affirmed its Aa2 rating on Shell but changed its outlook to negative. Moody's said the dividend hike caused the change in outlook, not Shell's $451 million after-tax loss in the second quarter.

Shell is a wholly owned subsidiary of Shell Petroleum Inc., a group holding company of Royal Dutch/Shell Group Co.

BT Securities Corp. announced the hiring of Kevin Reynolds as vice president and manager for investment-grade securities in its global finance group.

Reynolds worked for two years at Citicorp Securities Inc. as corporate bond product manager. He also worked at Salomon Brothers as a high-yield bond trader for three years. Treasury Market Yields Prev. Prev. Thursday Week Month3-Month Bill 4.51 4.41 4.226-Month Bill 5.02 4.90 4.811-Year Bill 5.52 5.40 5.472-Year Note 6.19 6.06 6.163-Year Note 6.45 6.38 6.475-Year Note 6.92 6.87 6.947-Year Note 7.08 7.04 6.9610-Year Note 7.27 7.24 7.3130-Year Bond 7.94 7.54 7.60 Source: Cantor, Fitzgerald/Telerate

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