Long-term interest rates fell sharply on Monday, as a strong dollar lifted the government bond market.
The yield on 30-year Treasury bonds fell to 6.77% from 6.80% on Friday.
Blue-chip stocks rose moderately. The Dow Jones industrial average added 16.05 points to 3,510.82. The Standard & Poor's 500 index gained 2.54 points to 446.22.
Nasdaq Index Down Almost a Point
But over-the-counter stocks fell. The Nasdaq composite index fell 0.86 point to 688.73.
The dollar rose to 110.62 yen from 109.75 and to 1.6875 German marks from 1.6805.
The currency benefited from political uncertainty in Japan. Prime Minister Kiichi Miyazawa lost a no-confidence vote in Parliament last week, forcing national elections next month. European rate cuts on Monday also helped the dollar.
The dollar's advance increased the attractiveness of U.S. government securities.
Short-Selling Also a Factor
"The long bond responded positively to the turnaround in the value of the dollar on foreign exchange markets," said William Sullivan, money market economist at Dean Witter, Discover & Co.
He added that short-covering also helped bonds.
Astrid Adolfson, economist for MCM MoneyWatch, said the bond market also moved higher on a statement by Treasury Secietary Lloyd Bensten on Monday that President Clinton's budget plan will pass.
She added that the market's gain on Monday was surprising, given the Treasury's heavy financing schedule this week.
About $67 billion in new Treasury securities is headed for the market.
Three-Month Bilis at 3.07%
The Treasury on Monday auctioned a total of $24 billion in three-month and six-month bills. The three-month bill was sold at an average discount rate of 3.10%, up from 3.07% at last week's auction. The rate on the six-month bill was 3.19%, unchanged from last week.
Today the Treasury is scheduled to sell $16 billion in two-year notes. In when-issued trading, the notes were yielding 4.20%.
The Treasury will return on Wednesday with $11 billion of five-year notes and on Thursday with $15.75 billion of one-year bills.