CREDIT : Quiet Session Leaves Bonds Little Changed
Bond prices finished little changed to slightly lower Monday in the quietest trading in a month as worries about the dollar were offset by another drop in stock prices.
The Treasury’s bellwether 30-year bond fell 2/32 point, or about 60 cents for every $1,000 in face value. Its yield rose to 8.85% from 8.84% late Friday.
Meanwhile, interest rates on short-term Treasury securities were mixed in Monday’s auction as three-month bill rates fell to their lowest level in two weeks while six-month rates were unchanged from a week earlier.
In a separate report, the Federal Reserve said Monday that the average yield for one-year Treasury bills, the most popular index for making changes in adjustable-rate home mortgages, rose to 6.87% last week, up from 6.73% the previous week.
William V. Sullivan Jr., director of money market research at Dean Witter Reynolds, said the secondary market for bonds “marked time” amid “the crosscurrents of a lower dollar against a backdrop of weaker equity prices.”
The dollar drifted lower on world foreign exchange markets. Some analysts fear that declines in the currency could curb foreign investors’ appetite for dollar-denominated issues.
But on the other side of the ledger, the stock market fell broadly and the Dow Jones average of 30 industrials dropped 58.85 points, or 3%, to close at 1,900.20. It was the average’s ninth-largest point loss on record.
The decline in stock prices has driven some investors to the Treasury bond markets, where they can lock in an interest rate and feel comfortable that the federal government is standing behind the issue.
Sullivan said the last time the market was as stable as it appeared on Monday was Oct. 6. Trading activity was light, he said.
In the secondary market for Treasury issues, prices of short-term government issues were unchanged, intermediate maturities were off 2/32 point and 20-year issues fell point, according to Telerate, the financial information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
Yields on three-month Treasury bills, meanwhile, rose 1 basis point to 5.70%, six-month bills rose 10 basis points to 6.18% and one-year bills rose 2 basis points to 6.47%. A basis point is a hundredth of a percentage point.
Corporate bond prices were unavailable.
The federal funds rate, the interest banks charge each other on overnight loans, was quoted at 6.75%, up from 6.675% late Friday.
Tables, Page 14
Dow falls 58.85, Part I, Page1
