CREDIT : Bond Prices Rebound in Light Trading
Bond prices were higher in fairly light trading Thursday as investors awaited the latest government report on unemployment.
The Treasury’s bellwether 30-year issue, which in the previous session fell about point, or $2.50 per $1,000 face amount, closed up $3.75.
Its yield, which moves inversely to its price, fell to 9.03% from 9.08% late Wednesday.
Elizabeth G. Reiners, an economist at Dean Witter Reynolds Inc., attributed the price rebound to speculation that the July unemployment data, scheduled to be released today, would show a weakening in the labor force.
Softness in the economy is usually considered bullish for the credit markets because it lessens the prospects for higher inflation, which erodes the value of fixed-income securities and causes interest rates to rise.
A stable dollar in foreign exchange trading also gave a positive tone to bond prices, traders said.
In the secondary market for Treasury bonds, prices of short-term governments rose between 1/16 point and 1/8 point, intermediate maturities were 1/8 point to 5/16 point higher, and long-term issues were up about 3/8 point, according to Telerate Inc., a financial information service.
Funds Rate Unchanged
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, rose 2.29 to 1,143.75.
Corporate bonds were higher. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.94 to 285.27.
In the tax-exempt market, general obligation and revenue bonds were up about point from Wednesday, with the average yield down to 8% from 8.02%, according to the Bond Buyer index of 40 actively traded municipal bonds.
Yields on three-month Treasury bills fell to 7.04% as the discount fell 3 basis points to 6.84%. Yields on six-month bills fell to 7.42% as the discount fell 2 basis points to 7.07%. Yields on one-year bills fell to 7.42% as the discount fell 2 basis points to 7.28%.
A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.
The federal funds rate, the interest on overnight loans between banks, traded at 7.688%, unchanged from late Wednesday.
