Prices of government securities tumbled yesterday as a weaker-than-expected report on the U.S. international trade deficit pressured the dollar.
The market recovered some of its early losses as investors sought to cover short positions in the afternoon, but the overall tone of the market was bearish and sellers dominated. After being down over 1/2 point at midmorning, the benchmark 30-year Treasury bond closed down nearly 1/4 point, to yield 7.77%. The market got off to a bad start when the Commerce Department reported that the U.S. international trade deficit hit $10.99 billion in July, a whopping 21.6% increase from a revised $9.04 billion in June. The increase far exceeded most economists' expectations, which generally hovered in the $9.6 billion range. Compounding the negative implications of the report, the U.S. bilateral trade deficit with Japan increased 2.7% in July to $5.67 billion, its highest level since March.