CREDIT : Bond Prices Inch Up After U.S. Auction Winds Down
Treasury bond prices rose slightly Wednesday after the government completed an auction of notes, but corporate and municipal issues continued to edge downward.
The Treasury’s 30-year bond rose 7/32 point, or about $2.20 per $1,000 in face amount. Its yield, which moves in the opposite direction from its price, fell to 9.11% from 9.13% late Tuesday.
The government auctioned $7.02 billion in four-year notes at an average yield of 8.76% on Wednesday, on the heels of Tuesday’s auction of $8.78 billion in two-year notes.
Although demand in the auctions was not especially good, traders were relieved that they were over, said James Marshall, a government securities trader at Clayton Brown & Associates in Chicago.
Bond prices also were helped by a rumor that today’s report on jobless claims for the latest week would indicate an increase in unemployment, Marshall said. A weak economy with low inflation is good for fixed-income securities.
Government Issues Up
In the secondary market for Treasury bonds, prices of short-term government issues rose 1/32 to 3/32 point; intermediate issues were up 7/32 to point, and the 20-year issue gained 7/32, 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 bond with a $1,000 face value.
The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 1.32 to 1,139.24.
The uptick in Treasuries did not carry over to the rest of the credit market.
In corporate trading, industrials 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 0.40 to 289.38.
Federal Funds Rate Dips
The Bond Buyers municipal bond index of 40 long-term, investment-grade municipal bonds fell to 90.03 from 90.125 on Tuesday.
Yields on three-month Treasury bills fell to 7.54% as the discount fell 3 basis points to 7.31%. Yields on six-month bills fell to 7.93% as the discount fell 2 basis points to 7.53%. Yields on one-year bills fell to 8.17% as the discount fell 2 basis points to 7.60%.
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 8.188%, down from 8.25% late Tuesday.
