CREDIT : Bond Prices Post Modest Gain, Buoyed by Commodities’ Drop
Bond prices rose modestly Monday in quiet trading after a week of steady decline. Analysts said the market drew some support from lower commodity prices.
The Treasury’s closely watched 30-year bond advanced about point, or $2.50 for every $1,000 in face value. Its yield, which is often an indicator of interest rate trends, declined to 9.06% from 9.09% late Friday.
The yield on the 30-year issue had risen steadily since July 1, when it stood at 8.83%.
“The big thing is nothing happened,” said Ward McCarthy, chief financial economist for Merrill Lynch Capital Markets. “This market was a big yawner.”
The only development of note, he said, was that bond values were boosted slightly by steep falls in the prices of oil and farm commodities--which quelled inflationary fears. Inflation is a key enemy of bond prices, because it tends to erode the value of fixed-income securities.
Crude oil prices tumbled 68 cents a barrel to the lowest close since late 1986, while grain and soybean futures dropped to their lowest levels in about a month.
In addition, lower bond prices from the previous week attracted some bargain hunters, said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc.
In the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 1/16 point higher, intermediate maturities gained 1/32 point to 3/32 point and 20-year issues jumped 9/16 point, according to Telerate Inc., a business-information service.
The movement of a point is equivalent to a change of $10 in the price of a $1,000 bond.
The Shearson Lehman daily Treasury bond index, which measures price movements on outstanding Treasury issues with maturities of a year or longer, rose 1.26 to 1,141.76.
In corporate trading, industrials and utilities rose point in light activity, according to the investment firm Salomon Bros.
Yields on three-month Treasury bills, meanwhile, fell 4 basis points to 6.61%. Six-month bills also lost 4 basis points, at 6.93%, while one-year bills slipped 1 basis point to 7.23%.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 7.563%, up from Friday’s 7.438%.
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