Treasuries gain after a profit warning by General Motors, but greenback slides after deficit report.

March 16, 2005: 5:04 PM EST

NEW YORK (CNN/Money) - Treasury prices rose Wednesday after General Motors' profit warning, while the dollar fell for a second straight session as the current account deficit jumped to a record in the fourth quarter.

The benchmark 10-year note rose 9/32 of a point to 95-30/32 to yield 4.51 percent, down from 4.54 percent late Tuesday.
The 30-year bond gained 16/32 of a point to 108-17/32 to yield 4.80 percent, down from 4.82 percent late Tuesday. Bond prices and yields move in opposite directions.
The five-year note rose 6/32 of a point to yield 4.18 percent, while the two-year note edged up two ticks, yielding 3.72 percent.
GM (Research) said it now expects a first-quarter loss reflecting lower North American sales and production and a tougher pricing environment. Previously it had expected to break even.
The news hurt stock prices as well as corporate bonds; dealers fear that GM debt could be downgraded to junk status. That sent investors to the safe haven of government securities.
Meanwhile, a government report showed that the U.S. current account deficit jumped more than expected in the last quarter to a record $187.9 billion, driving the full-year gap to a new high of $665.9 billion.
The quarterly gap overshot Wall Street expectations for a $181.9 billion deficit, fueling fears about how long such massive borrowing could be sustained.
In other economic news, U.S. housing starts rose 0.5 percent last month to a 21-year high, defying Wall Street expectations for a decline, as single-family starts jumped to a record, according to a Commerce Department report.
And, U.S. industrial production rose 0.3 percent in February, but was less than expected, while a climb in capacity utilization to 79.4 percent was greater than estimates.
"The Fed would only pause on the GM news if there were some indication that the news threatens the health of the economy as a whole or the health of the financial markets as a
whole," Chris Low, chief economist at FTN Financial, told Reuters.
In currency trading, investors shied away from the dollar after news of the current account gap.
The dollar bought ¥104.15 Wednesday, down from ¥104.55 late Tuesday, while the euro
bought $1.3418, up from $1.3313 late Tuesday.
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