CREDIT : Bond Prices End Mixed Despite Inflation Data
Bond prices were narrowly mixed Friday, showing little reaction to the government’s report of moderate inflation during May but finishing below the day’s highs following a late selloff.
The Treasury’s 30-year bond rose 3/32 point in price, with its yield unchanged from late Thursday at nearly 9.04%.
The Labor Department reported Friday that wholesale prices rose a moderate 0.5% in May, roughly the same as in the two previous months.
Buyers of fixed-income securities such as bonds watch indicators such as the government’s producer price index for signals of accelerating inflation, which erodes the value of fixed-income investments. But Friday’s report largely was in line with forecasts of economists and prompted little movement in bond prices, analysts said.
Analysts also noted that bond prices, which move inversely from interest rates, hit their highs of the day as oil futures prices fell late in the trading session.
Furthermore, analysts said, bond prices may have been aided by sluggishness in the federal funds rate, the interest charged on overnight loans between banks and a widely watched indicator of short-term rate trends. Fed funds traded at 7.313% late Friday, up only slightly from 7.25% late Thursday.
In the secondary market for Treasury bonds, prices of short-term government issues fell 1/16 point, intermediate maturities were unchanged to 1/16 point higher and long-term issues rose 1/8 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, rose 0.04 to 109.77. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 0.31 to 1,148.70.
Among corporate issues, industrials were up point and utilities rose 1/8 point, both in light trading, according to the investment firm Salomon Bros.
Among tax-exempt municipal bonds, general obligations were up 3/8 point and revenue bonds were point higher. Trading was active.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was up 3/16 point at 88 23/32 as of 3 p.m. EDT. The average yield fell to 8.05% from 8.07% late Thursday.
Yields on three-month Treasury bills were up 1 basis point at 6.44%. Six-month bills were unchanged at 6.64% and one-year bills were up 1 basis point at 6.95%. A basis point is one-hundredth of a percentage point.
