CREDIT : Uneasy Traders Help Pull Bond Prices Lower

Bond prices slipped lower Thursday amid some profit taking and trader uneasiness over various aspects of the economy’s performance, analysts said.

The Treasury’s bellwether 30-year bond was down 9/32 point, or $2.81 per $1,000 in face value. The long bond’s yield, which moves inversely to its price, rose to 9.04% from 9.01% on Wednesday.

Ron Talley, an economist at Mellon Bank in Pittsburgh, said some traders were taking profits to capitalize on recent hefty gains in the market.

He also said they were concerned about a recent escalation of commodities prices, especially in the agricultural sector, where a continuing drought in some parts of the country has raised the specter of diminished supplies.

Higher commodity prices are a harbinger of inflation, which is bad for bonds because it diminishes the value of existing securities and heightens the prospects of higher interest rates.

Talley said the market was also worried about recent signs of weakness in the dollar against the Japanese yen.

And he said traders were unhappy about the government’s release of seasonally adjusted trade figures, which showed March’s deficit at $11.9 billion, 22% higher than the previously reported $9.7-billion figure.

In the secondary market for Treasury bonds, prices of short-term government issues fell 1/32 point, intermediate maturities fell 3/32 point and long-term issues were down 11/32 point, according to the Telerate 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 0.14 to 109.73. The federal funds rate, the interest on overnight loans between banks, was quoted at 7.25%, unchanged from Wednesday.

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