Credit : Bonds Gain as Central Banks Boost Dollar

Associated Press

Bond prices rose Thursday as the battered dollar regained its footing.

The Treasury’s closely watched 30-year bond jumped a full point, or $10 for every $1,000 in face value. Its yield, which moves inversely to its price, tumbled to 9.04% from 9.14% late Wednesday.

Traders said bond prices were bolstered by the dollar stabilizing following its recent steep plunge, after central banks--including the U.S. Federal Reserve--intervened in the currency markets to buy dollars in a bid to defend the U.S. currency.

“Certainly, the central banks are doing their best to make (the dollar) stabilize,” said Mitchell Held, chief financial economist for the investment firm Smith Barney, Harris Upham & Co.


Fed Could Boost Rates

The dollar was quoted at about 138.30 Japanese yen in late trading in New York, down slightly from 138.75 late Wednesday, after crashing to 137.55 yen in Tokyo--its lowest level since modern exchange rates were set in the late 1940s.

A weaker dollar makes Treasury bonds and notes, which are denominated in the U.S. currency, less attractive to foreign investors. And it opens the possibility that the Fed could raise interest rates in a bid to bolster the dollar and tighten credit, a move which would dampen bond prices.

In the secondary market for Treasury bonds, prices of short-term government issues rose 5/32 point to 1/2 point; intermediate maturities jumped 21/32 point to 1 1/16 points, and 20-year issues gained 11/16 point, according to figures provided by Telerate Inc.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Merrill Lynch Treasury bond index, which reflects price movements on outstanding Treasury bonds, edged up 0.45 to 110.18. The Shearson Lehman Treasury bond index, which makes a similar measurement, advanced 4.79 to 1,154.05.

Corporate Issues Higher

Yields on three-month Treasury bills, meanwhile, slipped 2 basis points to 5.02%, while six-month bills declined 6 basis points to 5.78% and one-year bills were down 3 basis points at 6.23%. A basis point is a hundredth of a percentage point.


Corporate bonds also were higher. Moody’s investment grade corporate bond index, which measures price movements on 100 corporate bonds with maturities of five years or longer, rose 0.91 to 259.21.

The federal funds rate, the interest banks charge each other on overnight loans, was quoted late in the day at 6.75%, down from 6.81% late Wednesday.