CREDIT : Jobless News Sends Price of Bonds Down
Bond prices tumbled in hectic trading Friday after the government released more positive news on the employment front.
The Treasury’s bellwether 30-year issue, which in the previous session rose about 3/8 point, or $3.75 per $1,000 face amount, closed down $7.50.
Its yield, which moves inversely to its price, jumped to 9.12% from 9.03% late Thursday.
“The fact that everyone has a job has got the bond market down,” said Jay Goldinger, a principal of the Beverly Hills investment firm Capital Insight Inc.
The Labor Department reported Friday that the civilian unemployment rate edged up 0.1% to 5.4% in July. But a separate survey of business and government payrolls turned up 283,000 new jobs last month.
Funds Rate Unchanged
Most private analysts had anticipated new payroll growth of only 150,000 to 200,000 jobs in July, normally a slow month in the labor market.
Also, revised numbers for June showed much stronger job creation. June payroll growth originally was put at 346,000, but based on new data, the government said Friday that it was actually 532,000.
Bondholders worry that a strong economy will bring about higher inflation, which erodes the value of fixed-income securities and causes interest rates to rise.
In the secondary market for Treasury bonds, prices of short-term governments fell about 3/8 point; intermediate maturities were 1/2 point to 3/4 point lower, and long-term issues were down about a point, according to Telerate Inc.
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, fell 6.07 to 1,137.68.
Corporate bonds were lower. Moody’s investment grade corpoRate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, dipped 1.56 to 283.71.
In the tax-exempt market, general obligation and revenue bonds were down about point from Thursday, with the average yield up to 8.02% from 8%, according to the Bond Buyer index of 40 actively traded municipal bonds.
Yields on three-month Treasury bills rose to 7.09% as the discount rate rose 6 basis points to 6.89%. Yields on six-month bills rose to 7.59% as the discount rose 16 basis points to 7.23%. Yields on one-year bills rose to 8.00% as the discount rose 18 basis points to 7.46%.
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 Thursday.
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