CREDIT : Bond Prices Narrowly Mixed in Quiet Session
Bond prices finished narrowly mixed Tuesday in light trading as the market searched vainly for convincing evidence about the strength of the economy.
The Treasury’s closely watched 30-year bond slipped 1/16 point, or less than $1 for every $1,000 in face value. Its yield was unchanged at 8.70%, the same as Monday.
“Right now, this market is in chains until the next employment number (in early April),” said Ward McCarthy, chief financial economist for Merrill Lynch Capital Markets.
He said the strong payroll employment figures contained in the February job report released earlier this month indicated that the economy was growing at a strong pace despite many analysts’ forecasts of weakness.
“That number was so strong that it created an environment in which investors are not willing to take much risk,” McCarthy said.
The government reported early Tuesday that durable goods orders fell 1.8% in February, matching a January decline. But that weak economic report was insufficient to persuade the bond market to ignore the strength evident in the February employment statistics, McCarthy said.
He said traders are aware that the durable goods figures are frequently revised.
William V. Sullivan Jr., director of money market research for Dean Witter Reynolds, said Tuesday’s light volume indicated that major institutional traders were showing no inclination to buy bonds.
In the secondary market for Treasury bonds, prices of short-term government issues were down 1/32 point, intermediate maturities were mostly unchanged and 20-year issues were up 3/32 point, according to figures provided by Telerate Inc., a 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.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, slipped 0.01 to 112.12. The Shearson Lehman Treasury bond index, which makes a similar measurement, fell 0.41 to 1,172.21.
In the tax-exempt market, the Bond Buyers municipal bond index, which measures price movements on 40 long-term bonds, was unchanged and its yield held steady at 8.18%.
Yields on three-month Treasury bills rose 8 basis points to 5.81%. Six-month bills rose 11 basis points to 6.01% and one-year bills rose 3 basis points to 6.34%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 6.438%, up from 6.375% on Monday.
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