Commodities : Treasury Bonds Plunge
Paul Volcker’s retirement as chairman of the Federal Reserve triggered immediate inflation Tuesday fears on many of the nation’s futures markets.
Treasury bonds put on the most dramatic performance, plunging more than 2 points on the Chicago Board of Trade, but sharp moves also were recorded in precious metals, the dollar index, foreign currencies and agricultural futures.
Alan Greenspan, President Reagan’s choice to succeed Volcker, is viewed “as basically a Wall Street economist with a shorter outlook than Volcker’s,” said Jack Barbanel, an analyst in New York with the investment firm Gruntal & Co.
The market’s reaction, he said, indicates a belief that Greenspan will not have Volcker’s independence and will be controlled by the White House.
“This means pumping more money into the system and over the long term, building a scenario for inflation,” said Barbanel.
Gold, silver and foreign currency futures may have overreacted somewhat “but the biggest surprise was the hit that bonds took,” Barbanel said.
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