CREDIT : Bond Prices End Lower in Erratic Trading

Bond prices finished lower and long-term yields edged higher in an erratic session Tuesday as traders nervously awaited the government’s next report on inflation.

The closely watched 30-year Treasury bond slipped 1/8 point, or nearly $1.25 per $1,000 in face amount.

The long bond’s yield rose to 9.04% from 9.01% late Monday. Those are the highest yields since mid-January.

Analysts said a decline in oil futures prices initially helped bond prices, pushing the 30-year Treasury issue up $5 for every $1,000 in face value in early trading.

But bond prices deteriorated during the afternoon, as speculation arose that the Labor Department’s report on March consumer prices, scheduled for release this morning, may show a big increase.

Maria F. Ramirez, an economist for Drexel Burnham Lambert Inc., said rumors circulated among bond traders that the consumer price index could rise more than twice as much as the consensus estimate of about 0.4%.

The bond market has been rocked in recent days by government reports that have shown stronger-than-expected economic growth and a bigger rise in wholesale prices last month than many analysts had expected.

Secondary Issues Drop

Bond investors fear inflation because it erodes the value of those holdings.

In the secondary market for Treasury bonds, prices of short-term governments were unchanged, intermediates fell 1/8 point and 20-year issues were off 5/32 point, according to the financial information service Telerate Inc.

The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.

In the tax-exempt market, prices of municipal bonds rose more than point in light dealings.

The federal funds rate, the interest on overnight loans between banks, traded at 6.813%, compared to 6.75% late Monday.

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