CREDIT : Bonds Show Some Gains; Trading Calm

Bond prices posted some modest gains Wednesday in quiet trading, taking their cue from a stronger dollar.

The Treasury’s 30-year bond rose nearly point, or $2.50 for every $1,000 in face amount. Its yield, which moves in the opposite direction from its price, slipped to 9.30% from 9.32% late Tuesday.

Analysts said bond prices got a lift after the dollar rose on reports that Japan’s central bank would not increase a key interest rate.

Robert Brusca, chief economist for Nikko Securities International, said 30-year bonds initially rose about $5 for every $1,000.

But he said prices later pulled back as rumors circulated that Japan may be ready to take steps short of a discount rate hike to defend the yen if the currency should weaken further against the dollar.

Brusca and other analysts said trading volume has been restrained as some traders refuse to sell or buy bonds in advance of Friday’s August unemployment report.

In the secondary market for Treasury bonds, prices of short-term governments rose 1/16 point, intermediate maturities rose 3/32 point and 20-year issues rose 5/16 point, according to Telerate Inc., a financial 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 all outstanding Treasury issues with maturities of a year or longer, rose 1.54 to 1,130.40.

Corporate bond prices edged up. Moody’s corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.85 to 284.33.

Meanwhile, yields on Treasury bills declined. Three-month Treasury bills fell 2 basis points to a discounted rate of 7.27% and a yield of 7.50%. Six-month bills fell 1 basis point to a discounted rate of 7.48% and a yield of 7.87%. One-year bills slipped 2 basis points to a discounted rate of 7.67% and a yield of 8.25%.

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, was quoted at 8.125%, up from 8% late Tuesday.

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