CREDIT : Bonds Ease in Light Trading
Bond prices fell slightly in thin, seesaw trading Tuesday as investors remained divided between fears of inflation and the possibility of a recession.
The bellwether 30-year Treasury issue fell 11/32 point from Monday’s level, a loss of about $3.40 per $1,000 in face value. Its yield, which moves opposite from its price, rose to 9.12% from 9.11% late Monday.
The yield on newly auctioned short-term Treasury bills also rose slightly.
The credit markets were quieter than on Monday, when a plunge in stock prices sent money flooding into bonds and offset the negative effect of inflation fears brought on by record lows in the dollar.
Wall Street stabilized Tuesday, and the Dow Jones industrial index ended the day up 8.79 points at 1,842.34. In addition, the dollar rebounded.
“The forces that are affecting stocks, bonds and currency prices have worked out to balance out each other,” said Joel Marver, an analyst for Technical Data International in Boston.
In a reflection of the market’s uncertainty, Marver said, the direction of prices reversed course about six times during the day.
Bond investors welcome signs of a recession because it slows down inflation, the enemy of fixed-income securities. But Marver said bond investors fear that the next recession could be accompanied by high inflation.
In the secondary market for Treasury bonds, prices of short-term governments were roughly unchanged, intermediate maturities fell about 1/16 point and long-term issues were down 3/8 point.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
In corporate trading, industrials fell and utilities fell 3/8 point in light to moderate trading, according to the investment firm Salomon Bros.
Municipal bond prices rose slightly, according to the bond buyer municipal bond index, which rose to 85 16/32 from 85 14/32 on Monday. The index covers 40 investment grade revenue bonds and general obligation issues.
Yields on three-month Treasury bills were up 3 basis points to 5.51%. Six-month bills were up 6 basis points at 6.17% and one-year bills were up 2 basis points at 6.57%. A basis point is one-hundredth of a percentage point. The federal funds rate, the interest on overnight loans between banks, traded at 7%, down from 7.188% late Monday.
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