- The Washington Times - Thursday, September 13, 2001

CHICAGO (AP) U.S. financial markets began their gradual return to work following a two-day shutdown today, with bond trading resuming and futures activity restarting on the Chicago Board of Trade and Chicago Mercantile Exchange.

Bond prices were sharply higher in early trading, an indication that investors, nervous about the economy even before Tuesday's terrorist attacks in New York and Washington, are seeking safe haven investments.

Many traders at the Chicago Merc tucked small American flags in their jacket pockets as they returned to the trading floor. Security guards lined up at the doors of the building and required those entering to show IDs or sign in as visitors.

Stock markets are still closed until at least tomorrow, but the resumption of electronic and open outcry trading on Chicago's venerable commodities exchanges came as a welcome sight to a financial community paralyzed for two days following the attacks on the World Trade Center and the Pentagon.

“It's going to be crazy, that's all I know. It's going to be a weird day because the world is now coming to us,'' said Thomas Ryan, who works at the Chicago Board of Trade. “We still possibly could be a target. We don't know.''

The Chicago exchanges resumed most of their regular trading in commodities, silver, gold, and some financial instruments related to foreign currencies and interest rates. Trading in U.S. stock-related products remained closed along with the New York Stock Exchange and Nasdaq and other stock markets.

U.S. government bonds, which also resumed trading Thursday among bond dealers and their customers, surged in early trading. The Federal Reserve and other central banks made massive amounts of cash available to the financial system in a move to restore confidence in investors.

The spike in short-term bonds also suggested that investors believed the Fed would move quickly to ease short-term interest rates in order to further reassure investors and prop up lenders at a time when massive reconstruction efforts lay ahead. The Fed has already lowered interest rates seven times this year to stimulate the economy.

“In some ways that's good news because historically a steep yield curve typically foreshadows stronger economic growth in the future, mainly because the profitability of lenders increases because they borrow short term and lend long-term,'' said David M. Jones, chief economist for Aubrey G. Lanston & Co., a government bond dealing firm.

The Treasury's two-year note was up 25/32 point to yield 3.09 percent, well below its previous yield of 3.49 percent late Monday, the last day of regular trading before the attacks occurred. Long-term Treasurys rose but by a lesser degree. The 10-year note was up 1 3/16 point to yield 4.70 percent, down from 4.84 percent Monday.

However, corporate bonds rose to a far lesser degree, signalling that investors fear that companies may have a harder time making profits amid a difficult economic environment, said David Lindsay, bond portfolio manager at Fleet Investment Advisors in Boston.

“The flight to quality trading appears to be going on,'' Linsday said. “Investors are afraid that all of this will make the economy weaker and more difficult for companies.''

The Chicago Board Options Exchange and Chicago Stock Exchange remained closed Thursday in conjunction with other equity markets. Like the New York markets, they plan to open no later than Monday and could resume trading on Friday.

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