CREDIT : Traders Cool to New Data; Bonds Inch Up
Bond prices rose slightly Wednesday in quiet trading, reacting only slightly to a wave of new economic data and a slump in gold prices.
The Treasury’s closely watched 30-year issue rose about point, or $2.50 for every $1,000 in face value. Its yield dipped to 9.01% from 9.04% late Tuesday.
The government released a number of economic statistics indicating that inflation remained steady, which would tend to support bond prices. But analysts said investor interest appeared to be focused on the precious metals market, where gold prices fell through the $400-an-ounce level in the United States for the first time since early last year.
The government reported that while consumer prices rose 0.4% in August, inflation held at a 5.2% annual rate, the same as in July.
The news on consumer prices and the fall in gold normally would bolster bond prices because they indicate an absence of inflationary pressures. But the market gave only a mild response, analysts said.
Consumer Spending Up
After rising early in the session, bond prices were little changed during the rest of the day, said Jay Goldinger, a principal of Capital Insight Inc., a Beverly Hills investment firm. “The market doesn’t know what to do with gold.”
Washington also reported that housing construction fell 3.3% last month and personal income rose a modest 0.2%, the lowest level in eight months. Consumer spending rose 0.5%.
Also Wednesday, the Treasury announced that it plans to sell $8.75 billion in two-year notes and $7 billion in four-year notes at auctions next week.
In the secondary market for Treasury bonds, prices of short-term government issues edged up 1/32 point to 1/16 point; intermediate maturities rose 1/16 point to 5/32 point, and 20-year issues were up 3/16 point, according to Telerate Inc., a financial information service.
Yields on three-month Treasury bills declined 1 basis point to 7.39% as the discount fell to 7.17%. Yields on six-month bills were unchanged at 7.73% with a discount of 7.35%. Yields on one-year bills rose 2 basis points to 8.02% as the discount rose to 7.49%.
The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.875%, up from 8.125% late Tuesday.