CREDIT : Doubts About Fed’s Plans Keep Bond Prices Steady

Bond prices finished unchanged to slightly lower Thursday amid renewed speculation that the Federal Reserve may be tightening its monetary policy to ward off higher inflation.

The Treasury’s closely watched 30-year bond lost about point, or $2.50 for every $1,000 in face value. Its yield, which moves inversely to its price and is often an indicator of interest rate trends, rose to 9.26% from 9.23% late Wednesday.

Analysts said Federal Reserve Board Chairman Alan Greenspan, who appeared before a congressional committee, failed to dampen the recent speculation in the market about a tightening of credit by the central bank.

Such tightening by the Fed tends to nudge up interest rates, which in turn drives bond prices lower.

Consumer Spending Up

“There’s uncertainty about what the Fed’s intentions are,” said Carol Stone, senior economist with Nomura Securities in New York. “Greenspan’s testimony signals a tightening move, we think. But it’s hard to know to what degree that tightening will be.”

Greenspan’s testimony came as the Commerce Department announced that consumer spending and personal income jumped substantially in June. Both are indicators of rising inflation, which tends to erode the value of fixed-income securities such as bonds and notes.

The government said personal income was up 0.7% last month, while consumer spending rose a hefty 1%, the sharpest rise since 1.3% in August.

In the secondary market for Treasury bonds, prices of short-term government issues were mostly unchanged, intermediate maturities slipped 1/32 point to 1/8 point, and 20-year issues declined 1/8 point, according to figures provided by Telerate Inc., a business information service.

Index Declines

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 Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, slipped 0.82 to 1,134.64.

Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, edged down 0.09 to 281.83.

Three-month Treasury bills, meanwhile, lost 2 basis points to a discounted rate of 6.97% and a yield of 7.18%. Six-month bills slipped 2 basis points to a discounted rate of 7.13% and a yield of 7.49%, while one-year bills edged down 1 basis point to a 7.32% discounted rate and a yield of 7.82%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discounted rate is the interest rate the market uses to price bills.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 7.813%, up from 7.375% late Wednesday.

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