CREDIT : Bond Prices Slip; Market Said to Lack Confidence
Bond prices slipped in dull trading Wednesday after receiving a modest lift from two government economic reports.
The Treasury’s closely watched 30-year bond lost about point, or $2.50 for every $1,000 in face value. Its yield rose to 8.73% from 8.70% late Tuesday.
“The market is just a little apprehensive and doesn’t have the confidence to buy that it ought to have,” said John V. Sebastian, an executive vice president at the Chicago-based investment firm Clayton Brown & Associates.
“There have been mixed signs of strength versus weakness (in the economy), and the bond market is doing nothing because it’s convinced of neither.”
Analysts said the credit market was helped temporarily by a Labor Department report showing a scant 0.2% rise in consumer prices during February. High inflation erodes the value of fixed-income securities.
The market was less interested in a revision of the gross national product for the fourth quarter. The Commerce Department said the economy expanded at a 4.8% annual rate, up from the 4.5% growth figure it reported a month ago.
“At this point it’s hard to read much into the GNP numbers” considering that they reflect economic activity that occurred more than three months ago, said Robert Chandross, vice president and chief economist at Lloyds Bank PLC’s North America office in New York.
Chandross said bearish sentiment pervaded the market.
“We’re in the last week of the (first) quarter, so there’s no great desire to go out and take positions,” he said.
In the secondary market for Treasury bonds, prices of short-term government issues declined 1/8 point to 3/16 point, intermediate maturities were down point to 3/8 point and 20-year issues fell 7/32 point, according to Telerate Inc., a financial information service.
The movement of a point is equivalent to a change of $10 in the price of a $1,000 bond.
The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, slipped 0.25 to 111.85.
In corporate trading, industrials and utilities declined point in light trading, according to the investment firm Salomon Bros.
In the tax-exempt market, the bond buyer index of 40 actively traded municipal bonds slipped 1/16 point to 87 23/32. The average yield edged up to 8.19% from 8.18% Tuesday.
Yields on three-month Treasury bills, meanwhile, rose 4 basis points to 5.84%. Six-month bills jumped 7 basis points to 6.04%, and one-year bills gained 5 basis points to 6.38%.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 7.50%, up from 6.438% Tuesday.
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