CREDIT : Bond Prices Fall on News of Unemployment Decline

Interest rates headed higher and bonds declined in value Friday after the government reported that the nation’s jobless rate slipped to its lowest level in 14 years during April.

The Treasury’s bellwether 30-year issue, which on Thursday gained about point, or $2.50 per $1,000 face amount, ended down $6.25. Its yield, which moves inversely to its price, rose to 9.15% from 9.09%.

Bond prices started out on a positive note but fell sharply shortly after the Labor Department reported that last month’s unemployment rate fell to 5.4%, the lowest since June, 1974.

A separate survey of business payrolls showed a gain of 175,000 jobs, more than one-fourth of them on factory assembly lines in industries that have increased their exports in recent months.

Analysts said the employment figures suggested that the economy was strengthening and that might prompt the Federal Reserve to tighten its credit policies to rein in growth. That would mean interest rates would rise, thereby lowering the value of existing bonds

In the secondary market for Treasury bonds, prices of short-term governments were 1/8 point to point lower, intermediate maturities fell between point and 1/2 point and long-term issues were down about 5/8 point, according to Telerate Inc., a business 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, fell 0.34 to 109.65. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, slipped 3.44 to 1,147.51.

Yields on three-month Treasury bills were up 7 basis points to 6.28%. A basis point is one-hundredth of a percentage point. Six-month bills rose 10 basis points to 6.49% and one-year bills were up 11 basis points at 6.84%.

The federal funds rate, the interest on overnight loans between banks, traded at 6.875%, up from 6.813% on Thursday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was down 1/32 point at 87.675.

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