CREDIT : Bond Prices Hold Steady in Quiet Session

Bond prices ended little changed Tuesday, which some strategists saw as evidence that the market’s huge rally in the previous session might not signal a trend.

The Treasury’s key 30-year bond, which surged nearly 2 5/8 points or $26.25 per $1,000 in face amount Friday, eased 1/32 point.

The bond’s yield, which is often a sign of the general direction in interest rates, rose to 9.046% from 9.04% Friday. The market was closed Monday for Labor Day.

Friday’s rally, the strongest since the aftermath of last October’s stock market crash, was based on a Labor Department report of rising unemployment, which suggested that the economy is weakening and easing inflationary pressures that could push interest rates higher.

Some bond analysts were impressed with the market’s post-holiday behavior, arguing that it showed that investors holding bonds were not eager to sell them for quick profits on Friday’s gain. That means prices could rise further if other evidence of U.S. economic weakness emerges, these analysts said.

But others said the bond market’s failure to strengthen after the weekend indicated that the rally Friday was largely technical in nature.

Moreover, they said, a deeper analysis of the unemployment report suggested that the rising number of jobless Americans might be a result of the drought, not a general slowdown in the economy. Many factories, for example, laid off workers during some of the summer’s highest temperatures.

“We jumped way up on one statistic,” said William Veronda, a fixed-income portfolio strategist at the Denver investment firm of Financial Programs Inc. “People are just beginning to look at what role the hot weather played.”

The federal funds rate, the interest on overnight loans between banks, traded at 7.75%, down from 8.188% late Friday.

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