CREDIT : Jump in Crude Prices Triggers Drop in Bonds

Bond prices fell Monday in thin trading in reaction to a rise in oil prices.

The Treasury’s closely watched 30-year bond fell about half a point, or about $5 for every $1,000 in face value. Its yield, which is often an indicator of interest rate trends, rose to 9.03% from 8.97% late Friday.

Prices were fairly steady until the afternoon, when statements from Venezuela and Saudi Arabia made some traders think that the Organization of Petroleum Exporting Countries might succeed in limiting its chronic overproduction, said Carol Stone, senior economist at Nomura Securities International.

On the New York Mercantile Exchange, the contract for October delivery of West Texas Intermediate, the benchmark grade of U.S. crude oil, rose 31 cents to settle at $14.49 a barrel.

Trading was light because of the Jewish New Year holiday and that tended to exaggerate the oil price rise, Stone said. She said the market had ignored oil prices earlier in the day, when the October contract briefly fell as low as $13.75 a barrel.

Moment of Truth

“I suspect we’ll get the moment of truth tomorrow when everyone gets back,” said Anthony Naylor, senior vice president at Rodman & Renshaw Inc.

In the secondary market for Treasury bonds, prices of short-term government issues were 1/16 to 1/8 point lower, intermediate maturities were 5/32 to 7/32 point lower and 20-year issues lost 19/32 point, according to Telerate Inc., a financial information service.

Corporate bonds fell slightly. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.31 to 288.88.

Yields on three-month Treasury bills, meanwhile, were down to 7.44%, as the discount fell 6 basis points to 7.22%.

The federal funds rate, the interest on overnight loans between banks, was unchanged late in the day at 8.125%.