CREDIT : Bond Prices Edge Lower as Traders Sit Out the Session
Bond prices fell in quiet trading Monday as many investors stayed on the sidelines awaiting new economic data.
The Treasury’s bellwether 30-year bond was down 17/32 point, or about $5.40 for every $1,000 in face value. Its yield, which moves inversely to its price and is often an indicator of interest rate trends, advanced to 9.45% from 9.39% late Friday.
There was no news to influence trading, and volume was light as investors awaited economic figures scheduled to be announced this week.
The Labor Department is scheduled to release today its consumer price index for July, and on Thursday, the Commerce Department is expected to announce its revised estimate of second-quarter growth in the gross national product.
David H. Resler, chief economist with Nomura Securities Inc., attributing some of the slowness in the credit markets to summer doldrums, noted that price movements are exaggerated in such thin trading.
“There are fewer people out there paying attention, so a few sellers can move the market,” he said.
Secondary Market Lower
Sung Won Sohn, chief economist with the Minneapolis bank holding company Norwest Corp., said traders were marking down prices in anticipation that the government reports would be disappointing.
“The CPI is expected to go up at a pretty healthy pace,” Sohn said.
A jump in the index would indicate that inflation was picking up steam. That in turn would raise fears that the Federal Reserve might nudge interest rates higher in hopes of keeping inflation in check.
The GNP report was expected to show strength in the economy, which also would raise the specter of an interest rate increase, Sohn said.
In the secondary market for Treasury securities Monday, prices of short-term government issues ranged 1/32 point to 3/32 point lower, intermediate maturities were down 1/8 point to 5/32 point, and 20-year issues lost point, according to figures provided by Telerate Inc., a financial information service.
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, was down 2.27 at 1,122.99.
Corporate bonds were fractionally higher. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, was up 0.09 at 281.35.
Fed Funds Rate Drops
Prices were little changed on the municipal bond market. The Bond Buyer municipal bond market index was down 1/32 point to 88 15/32 point, with a yield of 8.16%, unchanged from late Friday.
Three-month Treasury bills, meanwhile, rose 3 basis points to a discounted rate of 7.06% and a yield of 7.27%. Six-month bills were up 1 basis point at a discounted rate of 7.53% to yield 7.92%, while one-year bills were unchanged at 7.68% and a yield of 8.24%.
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 at 8%, down from 8.625% late Friday.
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