CREDIT : Bond Prices Jump in Reaction to Jobless Report

Bond prices surged Friday, bolstered by a government report showing a smaller-than-expected rise in payroll employment in September.

The Treasury’s closely watched 30-year bond jumped about 1 11/16 points, or $16.87 for every $1,000 in face value. Its yield, which moves in the opposite direction from its price and is an indicator of interest rate trends, tumbled to 8.79% from 8.94% late Thursday.

The Labor Department reported that the September unemployment rate fell 0.2 percentage point to 5.4%. But the bond market was more intent on a companion report that said payrolls grew by 255,000 jobs, slightly below the 300,000 that many analysts had expected.

The figures were considered fresh evidence of moderation in the economy.

“Basically, they were good for the market,” said Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc.

He said the report touched off a buying wave that was “sort of like a snowball effect.”

Steven A. Wood, money market economist for BankAmerica Capital Markets Group, said the data provided “further evidence that the economy is slowing down from the robust pace of expansion in the first half of the year.”

Eases Credit Demands

Payroll employment had been growing at a pace of about 340,000 a month in the first six months of the year, but that has slowed to an average of just over 200,000 in each of the past three months.

A slower economy means credit demands may abate somewhat, easing upward pressure on interest rates. It also would reduce inflationary pressures, which erode bond values.

In the secondary market, prices of short-term Treasury issues rose to between 9/32 point and 9/16 point, intermediate maturities advanced between 11/16 point and a full point, and 20-year issues gained 1 3/16 point, according to figures provided by 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, jumped 7.92 to 1,155.53.

In corporate trading, prices 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 2.28 to 295.54.

Fed Funds Rate Drops

Yields on three-month Treasury bills, meanwhile, declined to 7.51% and the discount slipped 3 basis points to 7.28%. Yields on six-month bills fell to 7.83% and the discount fell 8 basis points to 7.44%. Yields on one-year bills dropped to 8.00% and the discount tumbled 12 basis points to 7.46%.

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 8.313% late Thursday.

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