Commodities Thursday, Feb. 6, 1986 : Treasury Bond Futures Off

Treasury bond futures suffered sizable losses Thursday because of the imminent ruling on the constitutionality of the Gramm-Rudman federal budget balancing law.

Also undercutting prices was action by the Federal Reserve to drain money from the system for the second straight day and the belief that employment figures coming out Friday could show a decline in the jobless rate, said Gary Dorsch, an analyst in Chicago with G. H. Miller & Co. The Treasury bond contract for delivery in March slumped by 27/32 of a point before trimming the loss to 17/32 and settling at 85.11 at the Chicago Board of Trade.

“There’s concern that Gramm-Rudmann will be declared unconstitutional,” Dorsch said. “Without the cap on goverment spending, the government would be forced to borrow heavily to finance its daily operations.”

“Billions of dollars have been placed on the table, betting on fiscal responsibility,” he said. “For the last several months investors have been buying bonds based on expectations of reduced budget deficits in the future.”