Treasury bond futures prices advanced strongly Monday, shrugging off a rally in oil prices as merely a temporary diversion in their downward slide.
Some Treasury bond contacts soared the 2-point (64/32) limit for daily trading on the Chicago Board of Trade. The March contract at one point hit 92 4/32, up 1 30/32, before profit taking lowered the gain to 91 14/32, up 1 8/32 at the close.
The weakness in energy prices, despite Monday's advances, create the belief that the economy will be hovering near 0% inflation, said Gary Dorsch, an analyst in Chicago with G. H. Miller & Co.
Lower inflation tends to support the bond market.
In addition to oil, Dorsch said, bond futures were propelled by the notion that, if Mexico is not able to service its debt obligation for 1986, the Federal Reserve Board may have to lower interest rates.
Also, he said, there is speculation that foreign central banks, particularly Japan's, may lower interest rates in March to stabilize the Japanese yen.