CREDIT : Bonds Recoup Early Losses to Close Mixed
Bonds recouped some of their early losses Friday to end narrowly mixed.
Analysts said trading activity was light, with many participants getting an early jump on the long Memorial Day weekend.
The Treasury’s bellwether 30-year issue, which fell about point, or $2.50 per $1,000 face amount, by midday, closed up 62.5 cents. Its yield, which moves inversely to its price, slipped to 9.31% from Thursday’s close of 9.32%.
The bond market started out on a down note amid speculation that the Federal Reserve was tightening its credit policies again to prevent the economy from overheating and inflation from rekindling.
But fears of higher interest rates abated somewhat with an easing of the closely watched federal funds rate, the interest on overnight loans between banks. It traded at 7.25%, down from 7.75% late Thursday.
Fears of Fed tightening stemmed from Thursday’s revised report on first-quarter gross national product, which found the economy grew at a brisk 3.9% annual rate.
In the secondary market for Treasury bonds, prices of short-term governments were unchanged to 1/32 point higher, intermediate maturities ranged from unchanged to up 1/32 point and long-term issues were down 1/8 point to up 1/16 point, according to figures provided by 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 0.03 to 108.32. The Shearson Lehman Hutton daily Treasury bond index, which makes a similar measurement, stood at 1,133.97, down 0.34.
In corporate trading, industrials and utilities were unchanged 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 was unchanged at 87 5/32 as of 3 p.m. EDT. The average yield also was unchanged from late Thursday at 8.21%.
Yields on three-month Treasury bills were down 1 basis point to 6.43%. A basis point is one-hundredth of a percentage point. Six-month bills fell 2 basis points to 6.83% and one-year bills were off 7.12%.