CREDIT : Bonds End Mixed; Budget Talks Weigh Down Market
Bond prices finished narrowly mixed Thursday, with short-term issues drifting lower while long-term Treasury bonds inched higher.
Disappointment with budget talks in Washington tended to offset the market’s positive response to new trade figures.
The Treasury’s bellwether 30-year bond finished up 1/16 point, or about 60 cents for every $1,000 in face value, while its yield dipped to 8.87% from 8.88% late Tuesday.
The cash market for U.S. Treasury bonds was closed Wednesday for the Veterans Day holiday.
The bond market was cheered somewhat by an improvement in the nation’s trade deficit in September. The imbalance fell to $14.1 billion from $15.7 billion in August, the biggest decline in the trade deficit since May.
The report sparked a rally in the dollar, which calmed fears for the moment that the currency’s recent decline would discourage foreign investors from buying dollar-denominated securities. That lifted bond prices.
No Progress on Budget
But the market’s enthusiasm was muted by concerns about a lack of progress on reducing the federal budget deficit.
“All of the financial markets now have their focus on Washington” and the talks over how to reduce the budget deficit, said Harold Nathan, senior financial economist for Wells Fargo & Co. in San Francisco.
No progress was reported in the budget talks in Washington, where hopes had been high that negotiators would complete their work by Friday.
“I don’t expect any early resolution of the talks . . . it may take us into next week,” said House Majority Leader Thomas S. Foley, (D-Wash.), chairman of the working group.
Asked what the snag was, he replied: “Everything.”
“Maybe it just gets darkest before the dawn,” said House Republican Leader Bob Michel of Illinois as the closed-door talks dragged on.
The federal funds rate, the interest on overnight loans between banks, traded at 6.75%, up from 6.675% late Tuesday.
In the secondary market for Treasury issues, prices of short-term governments fell 3/32 point, intermediate maturities were mixed with some issues off 1/32 point and others up 1/16 point and 20-year issues were up 3/16 point.
