Bond Investors Shouldn't Hit The Panic Button

The party's over, but is it time to go home? The bond market rally, which began last fall, peaked in mid-February with the end of the Persian Gulf war. Since then, bond prices have edged down -- 4.5% for the benchmark 30-year Treasury -- as evidence has accumulated that the recession is ending. Says Hugh A. Johnson Jr., chief investment officer at First Albany Corp.: "No wonder the bond market is demoralized." Traders fear that a robust recovery later this year will spark inflation and push up rates, which translates to plunging bond prices.

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