<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
 
                                   FORM 10-Q
 
(Mark One)
 
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
 
For the quarterly period ended September 30, 1998
 
                                       OR
 
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934
 
For the transition period from _______________________ to ______________________
 
Commission file number: 0-18418
 
              PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
--------------------------------------------------------------------------------
             (Exact name of Registrant as specified in its charter)
 
Delaware                                        13-3533120
--------------------------------------------------------------------------------
(State or other jurisdiction of     (I.R.S. Employer Identification No.)
 incorporation or organization)
 
One New York Plaza, 13th Floor New York, New York             10292
--------------------------------------------------------------------------------
(Address of principal executive offices)                    (Zip Code)
 
Registrant's telephone number, including area code (212) 778-7866
 
                                      N/A
--------------------------------------------------------------------------------
   Former name, former address and former fiscal year, if changed since last
                                    report.
 
   Indicate by check CK whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes CK  No __

<PAGE>
                         Part I. FINANCIAL INFORMATION
                          ITEM 1. FINANCIAL STATEMENTS
              PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
                            (a limited partnership)
                       STATEMENTS OF FINANCIAL CONDITION
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                                      September 30,     December 31,
                                                                          1998              1997
<S>                                                                   <C>               <C>
----------------------------------------------------------------------------------------------------
ASSETS
Equity in commodity trading accounts:
Cash                                                                   $ 6,007,687      $ 6,552,063
U.S. Treasury bills, at amortized cost                                  19,525,057       24,241,834
Net unrealized gain on open commodity positions                          1,427,823        1,584,684
                                                                      -------------     ------------
Total assets                                                           $26,960,567      $32,378,581
                                                                      -------------     ------------
                                                                      -------------     ------------
LIABILITIES AND PARTNERS' CAPITAL
Liabilities
Redemptions payable                                                    $ 1,328,563      $   740,550
Incentive fees payable                                                      95,954          226,348
Options, at market                                                          61,030            3,600
Management fees payable                                                     47,632           97,818
Accrued expenses                                                            44,528           55,038
Due to affiliates                                                           19,276            7,663
                                                                      -------------     ------------
Total liabilities                                                        1,596,983        1,131,017
                                                                      -------------     ------------
Commitments
Partners' capital
Limited partners (101,324 and 119,135 units outstanding)                25,109,818       30,934,928
General partner (1,024 and 1,204 units outstanding)                        253,766          312,636
                                                                      -------------     ------------
Total partners' capital                                                 25,363,584       31,247,564
                                                                      -------------     ------------
Total liabilities and partners' capital                                $26,960,567      $32,378,581
                                                                      -------------     ------------
                                                                      -------------     ------------
Net asset value per limited and general partnership unit ('Units')     $    247.82      $    259.66
                                                                      -------------     ------------
                                                                      -------------     ------------
----------------------------------------------------------------------------------------------------
                  The accompanying notes are an integral part of these statements.
</TABLE>
                                       2
<PAGE>
              PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
                            (a limited partnership)
                            STATEMENTS OF OPERATIONS
                                  (Unaudited)
 
<TABLE>
<CAPTION>
                                                     Nine Months                   Three Months
                                                 Ended September 30,            Ended September 30,
                                              --------------------------     -------------------------
                                                 1998            1997           1998           1997
<S>                                           <C>             <C>            <C>            <C>
------------------------------------------------------------------------------------------------------
REVENUES
Net realized gain on commodity
  transactions                                $   197,002     $2,465,020     $1,892,672     $2,938,161
Change in net unrealized gain/loss on open
  commodity positions                            (164,101)     1,614,438      2,231,068      1,465,952
Interest from U.S. Treasury bills                 787,466        913,775        227,843        318,399
                                              -----------     ----------     ----------     ----------
                                                  820,367      4,993,233      4,351,583      4,722,512
                                              -----------     ----------     ----------     ----------
EXPENSES
Commissions                                     1,703,654      1,948,700        485,914        642,255
Management fees                                   696,972        838,388        193,666        286,709
Incentive fees                                    103,710        207,032         95,954        177,442
General and administrative                        115,376        135,033         37,617         40,286
                                              -----------     ----------     ----------     ----------
                                                2,619,712      3,129,153        813,151      1,146,692
                                              -----------     ----------     ----------     ----------
Net income (loss)                             $(1,799,345)    $1,864,080     $3,538,432     $3,575,820
                                              -----------     ----------     ----------     ----------
                                              -----------     ----------     ----------     ----------
ALLOCATION OF NET INCOME (LOSS)
Limited partners                              $(1,781,376)    $1,845,442     $3,502,985     $3,540,056
                                              -----------     ----------     ----------     ----------
                                              -----------     ----------     ----------     ----------
General partner                               $   (17,969)    $   18,638     $   35,447     $   35,764
                                              -----------     ----------     ----------     ----------
                                              -----------     ----------     ----------     ----------
NET INCOME (LOSS) PER WEIGHTED AVERAGE
LIMITED AND GENERAL PARTNERSHIP UNIT
Net income (loss) per weighted average
  limited and general partnership unit        $    (15.57)    $    14.31     $    32.85     $    28.07
                                              -----------     ----------     ----------     ----------
                                              -----------     ----------     ----------     ----------
Weighted average number of limited and
  general partnership units outstanding           115,581        130,279        107,709        127,380
                                              -----------     ----------     ----------     ----------
                                              -----------     ----------     ----------     ----------
------------------------------------------------------------------------------------------------------
</TABLE>
 
                   STATEMENT OF CHANGES IN PARTNERS' CAPITAL
                                  (Unaudited)
<TABLE>
<CAPTION>
                                                              LIMITED       GENERAL
                                                UNITS        PARTNERS       PARTNER         TOTAL
<S>                                            <C>          <C>             <C>          <C>
----------------------------------------------------------------------------------------------------
Partners' capital--December 31, 1997            120,339     $30,934,928     $312,636     $31,247,564
Net loss                                             --      (1,781,376)     (17,969)     (1,799,345)
Redemptions                                     (17,991)     (4,043,734)     (40,901)     (4,084,635)
                                               --------     -----------     --------     -----------
Partners' capital--September 30, 1998           102,348     $25,109,818     $253,766     $25,363,584
                                               --------     -----------     --------     -----------
                                               --------     -----------     --------     -----------
----------------------------------------------------------------------------------------------------
                  The accompanying notes are an integral part of these statements.
</TABLE>
                                       3
<PAGE>
              PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
                            (a limited partnership)
                         NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 1998
                                  (Unaudited)
 
A. General
 
   These financial statements have been prepared without audit. In the opinion
of management, the financial statements contain all adjustments (consisting of
only normal recurring adjustments) necessary to present fairly the financial
position of Prudential-Bache Capital Return Futures Fund 2, L.P. (the
'Partnership') as of September 30, 1998 and the results of its operations for
the nine and three months ended September 30, 1998 and 1997. However, the
operating results for the interim periods may not be indicative of the results
expected for a full year.
 
   Certain information and footnote disclosures normally included in annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial statements be
read in conjunction with the financial statements and notes thereto included in
the Partnership's Annual Report on Form 10-K filed with the Securities and
Exchange Commission for the year ended December 31, 1997.
 
   Effective September 1, 1998, all assets previously managed by John W. Henry &
Company, Inc. (the 'Reallocated Assets') were reallocated to Welton Investment
Corporation ('Welton'), Eclipse Capital Management ('Eclipse') and to two
trading managers new to the Partnership--Gaiacorp Ireland Limited ('Gaiacorp')
and Trendlogic Associates, Inc. ('Trendlogic'). Welton, Eclipse, Gaiacorp and
Trendlogic (the 'Trading Managers') received Reallocated Assets totalling
approximately $4,934,000, $1,990,000, $6,871,000 and $5,000,000, respectively.
The Trading Managers receive monthly management fees on their portion of the
Reallocated Assets equal to a 2% annual rate as compared to the 4% annual rate
paid to John W. Henry & Company, Inc. The Trading Managers will earn a quarterly
incentive fee equal to 20% of New High Net Trading Profits (as defined in the
Advisory Agreement among the Partnership, the General Partner and each
respective Trading Manager) on the Reallocated Assets, except for Trendlogic
whose quarterly incentive fee rate is 17.5%. John W. Henry & Company, Inc.
received quarterly incentive fees at a 15% rate.
 
B. Related Parties
 
   Prudential Securities Futures Management Inc. (the 'General Partner') and its
affiliates perform services for the Partnership which include, but are not
limited to: brokerage services, accounting and financial management, registrar,
transfer and assignment functions, investor communications, printing and other
administrative services.
 
   The costs incurred for these services for the nine months ended September 30,
1998 and 1997 were:
 
<TABLE>
<CAPTION>
                                                     1998           1997
<S>                                               <C>            <C>
---------------------------------------------------------------------------
Commissions                                       $1,703,654     $1,948,700
General and administrative                            57,233         71,624
                                                  ----------     ----------
                                                  $1,760,887     $2,020,324
                                                  ----------     ----------
                                                  ----------     ----------
</TABLE>
 
   The costs incurred for these services for the three months ended September
30, 1998 and 1997 were:
 
<TABLE>
<CAPTION>
                                                     1998           1997
<S>                                               <C>            <C>
---------------------------------------------------------------------------
Commissions                                       $  485,914     $  642,255
General and administrative                            15,848         30,348
                                                  ----------     ----------
                                                  $  501,762     $  672,603
                                                  ----------     ----------
                                                  ----------     ----------
</TABLE>
 
   The General Partner is a wholly owned subsidiary of Prudential Securities
Incorporated ('PSI'), the Partnership's commodity broker. The Partnership
maintains its trading and cash accounts at PSI. Except for
 
                                       4
<PAGE>
the portion of assets that is deposited as margin to maintain forward currency
contract positions as further discussed below, the Partnership's assets are
maintained either with PSI or, for margin purposes, with the various exchanges
on which the Partnership is permitted to trade.
 
   The Partnership, acting through its trading managers, executes
over-the-counter, spot, forward and/or option foreign exchange transactions with
PSI. PSI then engages in back-to-back trading with an affiliate,
Prudential-Bache Global Markets Inc. ('PBGM'). PBGM attempts to earn a profit on
such transactions. PBGM keeps its prices on foreign currency competitive with
other interbank trading desks. All over-the-counter currency transactions 
are conducted between PSI and the Partnership pursuant to a line of 
credit. PSI may require that collateral be posted against
the marked-to-market position of the Partnership.
 
C. Credit and Market Risk
 
   Since the Partnership's business is to trade futures, forward (including
foreign exchange transactions) and options contracts, its capital is at risk due
to changes in the value of these contracts (market risk) or the inability of
counterparties to perform under the terms of the contracts (credit risk).
 
   Futures, forward and options contracts involve varying degrees of off-balance
sheet risk; and changes in the level of volatility of interest rates, foreign
currency exchange rates or the market values of the contracts (or commodities
underlying the contracts) frequently result in changes in the Partnership's
unrealized gain (loss) on open commodity positions reflected in the statements
of financial condition. The Partnership's exposure to market risk is influenced
by a number of factors including the relationships among the contracts held by
the Partnership as well as the liquidity of the markets in which the contracts
are traded.
 
   Futures and options contracts are traded on organized exchanges and are thus
distinguished from forward contracts which are entered into privately by the
parties. The credit risks associated with futures and options contracts are
typically perceived to be less than those associated with forward contracts,
because exchanges typically provide clearinghouse arrangements in which the
collective credit (subject to certain limitations) of the members of the
exchanges is pledged to support the financial integrity of the exchange. On the
other hand, the Partnership must rely solely on the credit of its broker (PSI)
with respect to forward transactions. The Partnership presents unrealized gains
and losses on open forward positions as a net amount in the statements of
financial condition because it has a master netting agreement with PSI.
 
   The General Partner attempts to minimize both credit and market risks by
requiring the Partnership's trading managers to abide by various trading
limitations and policies. The General Partner monitors compliance with these
trading limitations and policies which include, but are not limited to,
executing and clearing all trades with creditworthy counterparties (currently,
PSI is the sole counterparty or broker); limiting the amount of margin or
premium required for any one commodity or all commodities combined; and
generally limiting transactions to contracts which are traded in sufficient
volume to permit the taking and liquidating of positions. The General Partner
may impose additional restrictions (through modifications of such trading
limitations and policies) upon the trading activities of the trading managers as
it, in good faith, deems to be in the best interest of the Partnership.
 
   PSI, when acting as the Partnership's futures commission merchant in
accepting orders for the purchase or sale of domestic futures and options
contracts, is required by Commodity Futures Trading Commission ('CFTC')
regulations to separately account for and segregate as belonging to the
Partnership all assets of the Partnership relating to domestic futures and
options trading and is not to commingle such assets with other assets of PSI. At
September 30, 1998 and December 31, 1997, such segregated assets totalled
$19,071,017 and $22,947,166, respectively. Part 30.7 of the CFTC regulations
also requires PSI to secure assets of the Partnership related to foreign futures
and options trading which totalled $7,733,609 and $9,499,572 at September 30,
1998 and December 31, 1997, respectively. There are no segregation requirements
for assets related to forward trading.
 
   As of September 30, 1998, the Partnership's open futures, forward and options
contracts mature within one year.
 
                                       5
<PAGE>
   At September 30, 1998 and December 31, 1997, gross contract amounts of open
futures, forward and options contracts are:
 
<TABLE>
<CAPTION>
                                            1998            1997
                                        ------------    ------------
<S>                                     <C>             <C>
Currency Forward Contracts:
     Commitments to purchase            $  7,343,227    $    318,066
     Commitments to sell                  15,502,414      24,765,572
Currency Futures and Options
  Contracts:
     Commitments to purchase              12,381,125       1,232,952
     Commitments to sell                   6,148,743       4,626,480
Financial Futures and Options
  Contracts:
     Commitments to purchase             190,042,113     183,537,088
     Commitments to sell                   1,561,127     126,817,265
Other Futures and Options Contracts:
     Commitments to purchase               2,160,041       2,876,350
     Commitments to sell                   2,926,310      14,809,027
</TABLE>
 
   The gross contract amounts represent the Partnership's potential involvement
in a particular class of financial instrument (if it were to take or make
delivery on an underlying futures, forward or options contract). The gross
contract amounts significantly exceed the future cash requirements as the
Partnership intends to close out open positions prior to settlement and thus is
generally subject only to the risk of loss arising from the change in the value
of the contracts. As such, the Partnership considers the 'fair value' of its
futures, forward and options contracts to be the net unrealized gain or loss on
the contracts (plus premiums on options). Thus, the amount at risk associated
with counterparty nonperformance of all contracts is the net unrealized gain
included in the statements of financial condition. The market risk associated
with the Partnership's commitments to purchase commodities is limited to the
gross contract amounts involved, while the market risk associated with its
commitments to sell is unlimited since the Partnership's potential involvement
is to make delivery of an underlying commodity at the contract price; therefore,
it must repurchase the contract at prevailing market prices.
 
   At September 30, 1998 and December 31, 1997, the fair value of open futures,
forward and options contracts was:
 
<TABLE>
<CAPTION>
                                                  1998                           1997
                                       --------------------------     --------------------------
                                         Assets       Liabilities       Assets       Liabilities
                                       ----------     -----------     ----------     -----------
<S>                                    <C>            <C>             <C>            <C>
Futures Contracts:
  Domestic exchanges
     Financial                         $  420,800      $       --     $  178,094      $   (4,700)
     Currencies                           256,978         (99,247)        41,016          (6,677)
     Other                                 48,718         (50,887)     1,020,252          (1,810)
  Foreign exchanges
     Financial                            845,667          (5,616)       493,686        (229,030)
     Other                                 27,085        (110,586)       170,110          (4,500)
Forward Contracts:
     Currencies                           191,817         (96,906)       374,665        (446,422)
Options Contracts:
  Domestic exchanges
     Financial                                 --         (26,859)            --          (3,600)
     Currencies                                --          (8,500)            --              --
     Other                                     --         (24,776)            --              --
  Foreign exchanges
     Financial                                 --            (895)            --              --
                                       ----------     -----------     ----------     -----------
                                       $1,791,065      $ (424,272)    $2,277,823      $ (696,739)
                                       ----------     -----------     ----------     -----------
                                       ----------     -----------     ----------     -----------
</TABLE>
                                       6
<PAGE>
   The following table presents the average fair value of futures, forward and
options contracts during the nine months ended September 30, 1998 and 1997,
respectively.
 
<TABLE>
<CAPTION>
                                                  1998                           1997
                                       --------------------------     --------------------------
                                         Assets       Liabilities       Assets       Liabilities
                                       ----------     -----------     ----------     -----------
<S>                                    <C>            <C>             <C>            <C>
Futures Contracts:
  Domestic exchanges
     Financial                         $  198,912     $   (44,454)    $  255,773      $  (20,324)
     Currencies                           107,239         (29,058)       256,610         (34,099)
     Other                                188,854         (58,964)       277,697         (16,819)
  Foreign exchanges
     Financial                            646,542        (123,082)       787,999        (113,382)
     Other                                 62,905         (71,429)        24,447         (12,926)
Forward Contracts:
     Currencies                           191,462        (671,135)       579,280        (672,949)
Options Contracts:
  Domestic exchanges
     Financial                                 --         (19,832)            --         (22,008)
     Currencies                                --          (4,101)         2,560         (42,408)
     Other                                     --          (3,795)        18,619          (3,271)
  Foreign exchanges
     Financial                                 --             (90)         4,473          (5,886)
                                       ----------     -----------     ----------     -----------
                                       $1,395,914     $(1,025,940)    $2,207,458      $ (944,072)
                                       ----------     -----------     ----------     -----------
                                       ----------     -----------     ----------     -----------
</TABLE>
 
      The following table presents the average fair value of futures, forward
and options contracts during the three months ended September 30, 1998 and 1997,
respectively.
 
<TABLE>
<CAPTION>
                                                  1998                           1997
                                       --------------------------     --------------------------
                                         Assets       Liabilities       Assets       Liabilities
                                       ----------     -----------     ----------     -----------
<S>                                    <C>            <C>             <C>            <C>
Futures Contracts:
  Domestic exchanges
     Financial                         $  239,717     $   (49,116)    $  532,441      $  (15,336)
     Currencies                           125,264         (37,123)       118,752          (3,609)
     Other                                 72,664         (61,419)       368,017         (12,916)
  Foreign exchanges
     Financial                            611,072        (127,501)     1,448,006         (27,611)
     Other                                 23,566         (90,669)        51,169         (25,874)
Forward Contracts:
     Currencies                            52,244        (951,198)       503,901        (707,965)
Options Contracts:
  Domestic exchanges
     Financial                                 --         (37,115)            --         (28,496)
     Currencies                                --          (4,494)         6,400          (4,044)
     Other                                     --          (9,199)        12,945          (1,088)
  Foreign exchanges
     Financial                                 --            (224)           566            (344)
                                       ----------     -----------     ----------     -----------
                                       $1,124,527     $(1,368,058)    $3,042,197      $ (827,283)
                                       ----------     -----------     ----------     -----------
                                       ----------     -----------     ----------     -----------
</TABLE>
                                       7
<PAGE>
      The following table presents the trading revenues from futures, forward
and options contracts during the nine and three months ended September 30, 1998
and 1997, respectively.
 
<TABLE>
<CAPTION>
                                                  Nine Months                          Three Months
                                              Ended September 30,                   Ended September 30,
                                       ---------------------------------     ---------------------------------
<S>                                    <C>                <C>                <C>                <C>
                                            1998               1997               1998               1997
                                       --------------     --------------     --------------     --------------
Futures Contracts:
  Domestic exchanges
     Financial                          $    771,584       $    348,569        $1,557,171         $  481,107
     Currencies                               48,492            319,881           102,437            106,663
     Other                                (1,228,397)           965,760           277,735            315,373
  Foreign exchanges
     Financial                             1,817,661          3,237,995         2,854,293          3,337,537
     Other                                  (114,447)            64,384          (121,979)            30,817
Forward Contracts:
     Currencies                           (1,274,439)        (1,014,090)         (507,294)           102,314
Options Contracts:
  Domestic exchanges
     Financial                                 7,427             15,695           (44,123)            43,541
     Currencies                               (3,975)           110,600            (1,275)            25,404
     Other                                     7,844            102,556             5,624            (34,518)
  Foreign exchanges
     Financial                                 1,151            (71,892)            1,151             (4,125)
                                       --------------     --------------     --------------     --------------
                                        $     32,901       $  4,079,458        $4,123,740         $4,404,113
                                       --------------     --------------     --------------     --------------
                                       --------------     --------------     --------------     --------------
</TABLE>
                                       8
<PAGE>
              PRUDENTIAL-BACHE CAPITAL RETURN FUTURES FUND 2, L.P.
                            (a limited partnership)
           ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                      CONDITION AND RESULTS OF OPERATIONS
 
Liquidity and Capital Resources
 
   The Partnership commenced trading operations on October 6, 1989 with gross
proceeds of $101,010,000. After accounting for organizational and offering
costs, the Partnership's net proceeds were $99,010,000.
 
   At September 30, 1998, 100% of the Partnership's total net assets (the 'Net
Asset Value') was allocated to commodities trading. A significant portion of the
Net Asset Value was held in U.S. Treasury bills (which represented approximately
73% of the Net Asset Value prior to redemptions payable) and cash, which are
used as margin for the Partnership's trading in commodities. Inasmuch as the
sole business of the Partnership is to trade in commodities, the Partnership
continues to own such liquid assets to be used as margin.
 
   The percentage that U.S. Treasury bills bears to the total net assets varies
each day, and from month to month, as the market values of commodity interests
change. The balance of the total net assets is held in cash. All interest earned
on the Partnership's interest-bearing funds is paid to the Partnership.
 
   The commodities contracts are subject to periods of illiquidity because of
market conditions, regulatory considerations and other reasons. For example,
commodity exchanges limit fluctuations in certain commodity futures contract
prices during a single day by regulations referred to as 'daily limits.' During
a single day, no trades may be executed at prices beyond the daily limit. Once
the price of a futures contract for a particular commodity has increased or
decreased by an amount equal to the daily limit, positions in the commodity can
neither be taken nor liquidated unless traders are willing to effect trades at
or within the limit. Commodity futures prices have occasionally moved the daily
limit for several consecutive days with little or no trading. Such market
conditions could prevent the Partnership from promptly liquidating its commodity
futures positions.
 
   Since the Partnership's business is to trade futures, forward and options
contracts, its capital is at risk due to changes in the value of these contracts
(market risk) or the inability of counterparties to perform under the terms of
the contracts (credit risk). The general partner attempts to minimize these
risks by requiring the Partnership's trading managers to abide by various
trading limitations and policies. See Note C to the financial statements for a
further discussion on the credit and market risks associated with the
Partnership's futures, forward and options contracts.
 
   Redemptions by limited partners recorded for the nine and three months ended
September 30, 1998 were $4,043,734 and $1,314,933, respectively. Redemptions by
the general partner recorded for the nine and three months ended September 30,
1998 were $40,901 and $13,630, respectively. Redemptions by limited partners and
the general partner from commencement of operations, October 6, 1989, through
September 30, 1998, totalled $122,360,922 and $1,781,931, respectively. Future
redemptions will impact the amount of funds available for investment in
commodity contracts in subsequent periods.
 
   The Partnership does not have, nor does it expect to have, any capital
assets.
 
   Effective September 1, 1998, all assets previously managed by John W. Henry &
Company, Inc. (the 'Reallocated Assets') were reallocated to Welton Investment
Corporation ('Welton'), Eclipse Capital Management ('Eclipse') and to two
trading managers new to the Partnership--Gaiacorp Ireland Limited ('Gaiacorp')
and Trendlogic Associates, Inc. ('Trendlogic'). Welton, Eclipse, Gaiacorp and
Trendlogic (the 'Trading Managers') received Reallocated Assets totalling
approximately $4,934,000, $1,990,000, $6,871,000 and $5,000,000, respectively.
The Trading Managers receive monthly management fees on their portion of the
Reallocated Assets equal to a 2% annual rate as compared to the 4% annual rate
paid to John W. Henry & Company, Inc. The Trading Managers will earn a quarterly
incentive fee equal to 20% of New High Net Trading Profits (as defined in the
Advisory Agreement among the Partnership, the General Partner and each
respective Trading Manager) on the Reallocated Assets, except for Trendlogic
whose quarterly incentive fee rate is 17.5%. John W. Henry & Company, Inc.
received quarterly incentive fees at a 15% rate.
 
                                       9
<PAGE>
   Effective August 1, 1998, the General Partner reduced the annual rate of
commissions charged to the Partnership from 8.5% to 8.0% of Net Asset Value.
 
Year 2000 Risk
 
   Investment funds, like financial and business organizations and individuals
around the world, depend on the smooth functioning of computer systems. The year
2000, however, holds the potential for a significant disruption in the operation
of these systems. Many computer systems in use today cannot distinguish the year
2000 from the year 1900 because of the way in which dates are encoded. This is
commonly known as the 'Year 2000 Problem.' The Partnership could be adversely
affected if computer systems used by it or any third party with whom it has a
material relationship do not properly perform date comparisons and calculations
concerning dates on or after January 1, 2000, which in turn could have a
negative impact on the handling or determination of trades and prices and the
services provided to the Partnership.
 
   The Partnership has engaged third parties to perform primarily all of the
services it needs. Accordingly, the Partnership's Year 2000 Problems, if any,
are not its own but those that center on the ability of the General Partner,
Prudential Securities Incorporated, its Trading Managers and any other third
party with whom the Partnership has a material relationship (individually, a
'Service Provider,' and collectively, the 'Service Providers') to address and
correct problems that may cause their systems not to function as intended as a
result of the Year 2000 Problem.
 
   The Partnership has received assurances from its General Partner and from
Prudential Securities Incorporated that they anticipate being able to continue
their operations without any material adverse impact from the Year 2000 Problem.
Although other Service Providers, such as the Partnership's Trading Managers,
have not made similar representations to the Partnership, the Partnership has no
reason to believe that these Service Providers will not take steps necessary to
avoid any material adverse impact on the Partnership, though there can be no
assurance that this will be the case. The costs or consequences of incomplete or
untimely resolution of the Year 2000 Problem by the Service Providers, or by
governments, exchanges, clearing houses, regulators, banks and other third
parties, are unknown to the Partnership at this time, but could have a material
adverse impact on the operations of the Partnership. The General Partner will
promptly notify the Partnership's limited partners in the event it determines
that the Year 2000 Problem will have a material adverse impact on the
Partnership's operations.
 
   The Partnership has considered various alternatives as a contingency plan. If
the Year 2000 Problems are systemic, for example, the federal government, the
banking system, exchanges or utilities are affected materially, there may be no
adequate contingency plan for the Partnership to follow other than to suspend
operations. If the Year 2000 Problems are related to one or more of the other
Service Providers selected by the Partnership, the Partnership believes that
each such Service Provider is prepared to address any Year 2000 Problems which
arise that could have a material adverse impact on the Partnership's operations.
 
Results of Operations
 
   The Net Asset Value per Unit as of September 30, 1998 was $247.82, a decrease
of 4.56% from the December 31, 1997 Net Asset Value per Unit of $259.66.
Additionally, the Net Asset Value per Unit increased 15.28% during the quarter
ended September 30, 1998.
 
   Third quarter trading proved profitable for the Partnership. Trading resulted
in gains across the financial, metal, grain and meat sectors. Unprofitable
sectors included the currency, index, energy and soft sectors. July trading
resulted in a negative return due, in part, to low volatility resulting in
little opportunity to trade profitably. Bond sector positions lost value as
prices moved somewhat lower given the weakness in the U.S. dollar. Weakness in
U.S. bonds caused European bond prices to rise profiting the Partnership's long
European bond positions. The Partnership performed well throughout the remainder
of the quarter. As worldwide stock markets fell in August, a 'flight-to-quality'
ensued, causing existing long positions in U.S. and European bonds to rally
significantly. The 'flight-to-quality' also affected gold prices which, having
fallen in July to 19-year lows, rebounded in August and September. Positions in
the currency sector incurred losses as the value of the British pound and German
deutsche mark initially fell, only to recover and gain strength through to the
end of the quarter. Index positions also lost value as volatility in that sector
made trading difficult.
 
   Interest income from U.S. Treasury bills for the nine and three months ended
September 30, 1998 decreased by approximately $126,000 and $91,000,
respectively, as compared to the same periods in 1997.
 
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<PAGE>
These declines in interest income were the result of fewer funds being invested
in U.S. Treasury bills principally due to redemptions and weak trading
performance during the first half of 1998, as well as the result of a decline in
interest rates during 1998.
 
   Commissions are calculated on the Net Asset Value on the first day of each
month and, therefore, vary based on monthly trading performance and redemptions.
Commissions decreased by approximately $245,000 and $156,000 for the nine and
three months ended September 30, 1998, respectively, as compared to the same
periods in 1997 principally due to the effect of weak trading performance during
the first half of 1998 and redemptions on the monthly Net Asset Values as well
as a reduction in the commission rate from 8.5% to 8% as discussed in Liquidity
and Capital Resources above.
 
   All trading decisions are currently being made by the Trading Managers.
Effective September 1, 1998, the General Partner reallocated assets previously
managed by John W. Henry & Company, Inc. as further discussed in Liquidity and
Capital Resources above. Management fees are calculated on the portion of the
Net Asset Value allocated to each Trading Manager as of the end of each month
and, therefore, are affected by trading performance and redemptions. Management
fees decreased by approximately $141,000 and $93,000 for the nine and three
months ended September 30, 1998, respectively, as compared to the same periods
in 1997 due to fluctuations in monthly Net Asset Values as described above and a
reduction in the management fee rate on the Reallocated Assets as further
discussed in Liquidity and Capital Resources above.
 
   Incentive fees are based on the New High Net Trading Profits generated by
each Trading Manager, as defined in each Advisory Agreement among the
Partnership, the General Partner and each Trading Manager. Despite overall
Partnership trading losses, Welton, Gaiacorp and Trendlogic (the later two
Trading Managers were new to the Partnership as discussed in Liquidity and
Capital Resources above) each generated sufficient trading profits during the
nine months ended September 30, 1998 to earn incentive fees of approximately
$41,000, $10,000 and $53,000 for the nine months ended September 30, 1998,
respectively. With the exception of Welton, which earned incentive fees of
approximately $8,000 during the three months ended March 31, 1998, all 1998
incentive fees were earned during the three months ended September 30, 1998.
During the nine months ended September 30, 1997, John W. Henry & Company, Inc.,
Welton and Eclipse each generated sufficient trading profits to earn incentive
fees of $47,000, $50,000 and $110,000, respectively, which were primarily
generated during the third quarter of 1997.
 
   General and administrative expenses for the nine and three month periods
ended September 30, 1998 decreased by approximately $20,000 and $3,000,
respectively, as compared to the same periods in 1997. These expenses include
reimbursement of costs incurred by the General Partner on behalf of the
Partnership, in addition to accounting, audit, tax and legal fees as well as
printing and postage costs related to reports sent to limited partners.
 
                                       11
<PAGE>
                           PART II. OTHER INFORMATION
 
Item 1. Legal Proceedings--There are no material legal proceedings pending by or
        against the Registrant or the General Partner.
 
Item 2. Changes in Securities--None
 
Item 3. Defaults Upon Senior Securities--None
 
Item 4. Submission of Matters to a Vote of Security Holders--None
 
Item 5. Other Information--None
 
Item 6. Exhibits and Reports on Form 8-K:
 
       (a) Exhibits
 
             4.1  Agreement of Limited Partnership of the Registrant, dated as
                  of June 8, 1989 as amended and restated as of July 21, 1989
                  (incorporated by reference to Exhibits 3.1 and 4.1 to the
                  Registrant's Annual Report on Form 10-K for the period ended
                  December 31, 1989)
 
             4.2  Subscription Agreement (incorporated by reference to
                  Exhibit 4.2 to the Registrant's Registration Statement
                  on Form S-1, File No. 33-29039)
 
             4.3  Request for Redemption (incorporated by
                  reference to Exhibit 4.3 to the Registrant's
                  Registration Statement on Form S-1, File No.
                  33-29039)
 
            10.16 Advisory Agreement, dated September 1,
                  1998, among the Registrant, Prudential
                  Securities Futures Management Inc. and
                  Trendlogic Associates, Inc. (filed
                  herewith)
 
            10.17 Advisory Agreement, dated
                  September 1, 1998, among the
                  Registrant, Prudential Securities
                  Futures Management Inc. and
                  Gaiacorp Ireland Limited (filed herewith)
 
            10.18 Amendment to Advisory Agreement, dated September
                  1, 1998, among the Registrant, Prudential
                  Securities Futures Management Inc. and Welton
                  Investment Corporation (filed herewith)
            27    Financial Data Schedule (filed herewith)
 
       (b) Reports on Form 8-K--
 
           No reports on Form 8-K were filed during the quarter.
 
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<PAGE>
                                   SIGNATURES
 
   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
 
Prudential-Bache Capital Return Futures Fund 2, L.P.
 
By: Prudential Securities Futures Management Inc.
    A Delaware corporation, General Partner
 
     By: /s/ Steven Carlino                       Date: November 13, 1998
     ----------------------------------------
     Steven Carlino
     Vice President
     Chief Accounting Officer for the Registrant
 
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