"One more dip in the stock markets and that could do it; we will move through 6 per cent," said Carl Ericson, fixed income manager at Colonial Management Associates in Boston.
The 30-year US Treasury bond now yields 6.19 per cent, a quarter-point lower than three weeks ago, when plunging stock prices started driving investors to the refuge of fixed-income assets.
In the past decade US stocks have recovered from big falls as investors were confident the market would bounce back. Now this view is being challenged.The Dow is still rebounding - witness 28 October's record 337-point surge - but investors have yet to coax the 30-stock average to its old highs.
What it means for the popular averages is clear: the Dow industrials and the Standard & Poor's 500 index will find it much harder to recover lost ground than earlier this year.
US stocks fell on Friday on concerns that profits will be hurt by slowing South-east Asian economies and cut-throat competition at home and abroad.
The Dow Jones Industrial fell 101.92, or 1.3 per cent, to 7581.32 on Friday. But it gained 1.9 per cent for the week, its first weekly advance since 10 October. The Dow still hasn't managed to close above 7715.41, its level two weeks ago on the day before it took a one-day 7.2 per cent fall.
The Nasdaq Composite Index performed the worst, gaining 0.6 per cent on the week. Personal computer makers dragged it down high-flyers such as Dell Computer suffered the usual fate: investors now shudder at their record valuations.
Fears among bond investors that the Federal Reserve will raise interest rates again this year - a move that could aggravate financial tumult in Asia and Europe by making US investments even more alluring - are easing. Fed officials meet on Wednesday.
"As a result of concern about the global equity markets, the Fed will take a wait-and-see approach", said Michael Fields, at AMR Investments in Fort Worth, Texas. "We remain constructive on the US bond market. I think 6 per cent is realistic by year-end."
The US economy, which grew at an annual 3.5 per cent in the third quarter, could slow by 1 point next year because of the Asian crisis, economists say.
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