CREDIT : Bond Prices Up With Help of Dollar and Oil
Bond prices rose modestly Friday, supported by a strong dollar, fresh foreign demand and lower oil prices.
The Treasury’s key 30-year issue rose about $1.50 per $1,000 in face amount. Its yield, which moves inversely to its price and is a possible signal of other interest rate trends, declined to 8.83% from 8.85% late Thursday.
Analysts noted that there was strong foreign demand for bonds despite the long Independence Day weekend. Most traders closed shop at 3 p.m. EDT to get a jump on the three-day weekend.
“That demand, I would suspect, is being spurred by the strength of the dollar,” noted Mitchell Held, chief financial economist at Smith Barney, Harris Upham & Co.
A stronger dollar attracts foreign capital and boosts bond prices, while a weaker dollar discourages foreigners from investing in the United States, incites higher inflation and erodes bond prices.
Lower oil prices also supported bond prices by removing the specter of inflation, at least for the moment. The near-term contract for West Texas Intermediate, the benchmark U.S. crude oil, settled below $15 a barrel, its lowest level in nearly two years.
In the secondary market for Treasury bonds, prices of short-term government issues rose 1/32 point to 1/16 point, intermediate maturities rose 5/32 point to 3/16 point, and long-term issues gained 3/16 point, according to figures provided by Telerate Inc., a financial information service.
The movement of a point equals a $10 change 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 0.08 to 110.33. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, rose 1.49 to 1,154.65.
In corporate trading, industrials and utilities also rose. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.92 to 285.95.
Yields on three-month Treasury bills were unchanged at 6.55%. Six-month bills were off 2 basis points at 6.68% and year bills fell 4 basis points to 6.99%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 7.875%, down from 8.25% late Thursday.
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