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CREDIT : Bond Prices Droop to the Lowest Point in 5 Months

Associated Press

Bond prices edged down to five-month lows Monday as traders continued to be concerned about the outlook for inflation.

The Treasury’s bellwether 30-year bond fell 3/32 point, or about 94 cents for every $1,000 in face value. Its yield edged up to 9.35% from late Friday’s 9.34%.

The last time the bond’s yield was higher was in December, when it was 9.4%.

“Massive pessimism would not be an overstatement,” said Jay Goldinger, who runs Capital Insights, an investment banking firm based in Beverly Hills.

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“There is business being done. . . . But the mood is gloomy, and the consensus among most economists is that interest rates are still headed higher,” said John V. Sebastian, an economist at the Clayton Brown & Associates securities firm in Chicago.

Sebastian said Monday’s bond market activity was not getting any leadership from stocks, commodities or precious metals.

Instead, he said, the main reason many traders were buying bonds was that they were prepared to accept existing interest rates as “pretty good,” despite the apparent likelihood that higher future rates would force the face value of their bonds lower.

Indicators Drop

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In the secondary market for Treasury bonds, prices of short-term governments were unchanged to down 1/32 point, intermediate maturities were unchanged to down 1/16 point and the 20-year bond was down 1/32 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 $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, fell 0.04 to 108.41. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 0.19 to 1,134.70.

In corporate trading, industrials were off point and utilities were off 1/8 point in moderate trading.

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The Bond Buyer index of 40 long-term, investment-grade municipal bonds stood at 86 13/32, down nearly half a point from Friday’s close.

Yields on three-month Treasury bills were down 3 basis points to 6.24%. Six-month bills were unchanged at 6.63%, and one-year bills were up 2 basis points at 7%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, traded at 7.125%, down from 7.25% late Friday.

Tables, Page 18

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