Bond prices rose modestly Monday in mostly light trading, buoyed by sharply lower oil prices.
The Treasury’s closely watched 30-year bond rose 5/16 point, or about $3 for every $1,000 in face value. Its yield, which is often an indicator of interest rate trends, slipped to 8.95% from 8.98% late Friday.
On Friday, the key 30-year bond jumped $7.50 per $1,000.
Oil prices fell through the $14-a-barrel level last week for the first time in more than two years and have continued to weaken. The near-term contract for crude oil flirted with the $13-a-barrel level Monday on the New York Mercantile Exchange in a stiff test of lows.
Lower energy prices could translate into lower inflation, which makes fixed-income investments such as bonds more valuable.
But analysts said they were surprised that bond prices didn’t get more of a lift from the continued drop in oil prices.
“It traded without any real conviction,” said William Sullivan, director of money market research at Dean Witter Reynolds Inc.
Other factors, notably a weaker dollar and a rebound in precious metals prices, countered the bullish impact of the oil decline, Sullivan suggested.
Analysts said a government report showing that orders to U.S. factories rose a sharp 3.1% in August had little impact because it failed to erase a 3.6% decline in the previous month.
In the secondary market for Treasury bonds, prices of short-term government issues edged up between 1/32 and 1/8 point, intermediate maturities rose between 3/32 point and 3/16 point, and long-term issues gained 1/8 point, according to Telerate Inc., a financial information service.
The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Hutton composite Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was up 1.35 at 1,147.83.
In corporate trading, industrials and utilities also advanced. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.59 to 292.19.
Yields on three-month Treasury bills, meanwhile, slipped to 7.45%; the discount was down 2 basis points at 7.23%. Yields on six-month bills fell to 7.81%; the discount was down 2 basis points at 7.43%. Yields on one-year bills were unchanged at 8.11%; the discount was steady at 7.55%.
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%, up from 8% on Friday.