CREDIT : Bond Prices Move Lower After Last Week’s Hefty Gains

Bond prices turned broadly lower Tuesday, as traders tuned in on a host of bearish factors tugging at the market.

The Treasury’s bellwether 30-year bond was down 18/32 point, or $5.63 per $1,000 in face value. Its yield rose to 9.11% from 9.05% on Monday.

Analysts said no particular news kicked off the slide, suggesting instead that prices may simply have gotten top-heavy after the hefty gains of last week.

Traders found plenty of reasons to justify a negative stand, said John V. Sebastian, chief economist at the Chicago securities firm of Clayton Brown & Associates.

“Credit demand is still strong. Consumer confidence has rebounded. Auto sales in late May were up. Commodity prices have gone through the roof, thanks to our drought in the Middle West. All these things are bearish for bonds,” he said.

As demand pushes interest rates higher, prices of fixed-rate securities fall. Soaring commodity prices are also bad for bonds, because they suggest rising inflation, which also depresses the credit market.

In the secondary market for Treasury bonds, prices of short-term governments fell 3/32 point, intermediate maturities fell 13/32 point and long-term issues were down 15/32 point, according to the Telerate 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 0.25 to 109.40. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 2.24 to 1,145.30.

In corporate trading, industrials were off 1/2 point and utilities fell 3/8 in very light trading.

Among tax-exempt municipal bonds, general obligations and revenue bonds were unchanged in very light trading.

In the tax-exempt market, the bond buyer index of 40 actively traded municipal bonds was down 1/32 point at 88-1/32 as of 3 p.m. EDT. The average yield remained at 8.12%, unchanged from Monday.

Yields on three-month Treasury bills were down 2 basis points to 6.42%. Six-month bills fell 2 basis points to 6.70%, and one-year bills were off 1 basis point at 7.02%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, was quoted at 7.313%, down from 7.375% on Monday.

Tables, Page 21