CREDIT : Bond Interest Rates Climb Back Up to 9%

NEW YORK — Bond prices drifted lower Friday in sluggish trading, pushing key interest rates back up to 9% again.

The Treasury’s closely watched 30-year issue declined 1/8 point, or $1.25 for every $1,000 in face value.

The bond’s yield, which moves inversely to its price and is often an indicator of interest rate trends, edged up to 9% from 8.99% late Thursday. It had stayed below 9% for three days.

Analysts said the market was stalled by conflicting sentiments.

“This was slow, slower, slowest,” said Jay Goldinger, a principal of Capital Insight Inc., an investment firm in Beverly Hills. “It was exactly a stalemate.”

The decline occurred despite a new government report that suggested some economic sluggishness.

May Help Bonds

The Commerce Department said business inventories rose 0.3% in July after a 0.8% rise in June, while sales fell 0.2% in July, the first sales decline since January.

William V. Sullivan Jr., director of money market research for Dean Witter Reynolds Inc., said the slowing of inventory investment indicates “the economy may be moderating, and that’s basically a friendly development for bonds.”

But he said the bond market shrugged aside this report as well as other signs of economic moderation over the past few days, including a decline in August retail sales and a drop in energy and commodity prices.

“Many investors are still concerned about the pace of economic growth,” Sullivan said. “They think the trend in the economy is still upward.”

The worry is that the economy’s growth will push inflation higher, eroding the value of bonds and pressuring the Federal Reserve to take steps to slow growth and push interest rates higher.

Other bond investors, however, believe that inflationary pressures have eased, Goldinger noted.

“We’ve got some cross-currents here . . . it’s a big tug of war,” he said.

In the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 1/16 point lower, intermediate maturities declined 1/16 point to 3/32 point, and 20-year issues lost 3/32 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.

Index Slips

The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, slipped 0.78 to 1,144.49.

Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, slipped 0.29 to 290.34.

Yields on three-month Treasury bills, meanwhile, fell to 7.36% as the discount declined 3 basis points to 7.14%. Yields on six-month bills slipped to 7.74% as the discount edged down 1 basis point to 7.36%. Yields on one-year bills edged up to 7.98% as the discount rose 3 basis points to 7.45%.

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 late in the day at 7.875%, down from 8.25% late Thursday.

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