CREDIT : Dollar Helps Bond Prices Regain Ground
Bond prices bounced back Tuesday, retracing most of the ground lost in the previous session. Analysts credited a rebound in the dollar.
The Treasury’s closely watched 30-year bond climbed 29/32 point, or about $9 for every $1,000 in face value, after losing about $15 on Monday.
Its yield fell to 8.75% from a two-month high of 8.83% Monday.
“The bond market has been doing the dance of the dollar, and when the dollar was significantly stronger today, the bond market responded,” said F. Ward McCarthy, chief financial economist for Merrill Lynch Capital Markets.
When the dollar fell Monday, it reawakened fears that inflation could accelerate and that foreign investors would be discouraged from expanding their holdings of dollar-denominated securities.
But those fears were quieted Tuesday as the dollar edged higher in Europe and the United States, trading at 124.50 yen in London and later rising to 125.26 yen in New York from 123.84 yen late Monday.
McCarthy said the bond market shrugged aside the government’s report that the index of leading indicators rose 0.9% in February because the increase had been anticipated.
He said the market also failed to react to the government’s report that sales of new homes jumped 20.3% in February because the surge followed several months of severely depressed sales.
In the secondary market for Treasury issues, short-term governments rose 5/32 point, intermediate maturities jumped by between point and 18/32 point and 20-year issues climbed 5/8 point, according to Telerate Systems Inc., the financial information service.
In corporate trading, industrials and utilities rose 1/2 point in light trading, Salomon Bros. said.
In the tax-exempt market, the bond buyers municipal bond index, which measures prices of 40 long-term bonds, rose 6/32 point to 87 27/32 point while its yield to maturity fell to 8.17% from 8.19%.
The federal funds rate, the interest on overnight loans between banks, traded at 6.50%, down from 6.563% Monday.
