Chapter 7. Periodic Economic Reports


“One dog barks at nothing, ten thousand dogs assert its truth.”

 --Japanese proverb

The Trade Deficit Sparks a Bond Market Rout

On Tuesday morning, April 14, 1987, fixed income, currency, and commodity traders anxiously awaited the release of the latest measure of America’s perennial trade deficit with much of the world. The day before, the dollar, Treasury bonds, and U.S. stocks fell sharply, and precious metals rose in response to a late-day rumor that the merchandise trade deficit for February 1987 would be $18 billion—substantially more than the $13.3 billion consensus forecast. Recent price action suggested that bonds and the dollar were in a bear market, whereas stocks remained in a bull market. The question ...

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