CREDIT : Bond Prices End Mixed After Early Rally Runs Out of Steam

Bond prices were mixed in subdued trading Tuesday with little economic news to stir the market.

The Treasury’s closely watched 30-year bond rose 3/16 point, or about $1.90 for every $1,000 in face value. Its yield, which is often an indicator of interest rate trends, eased to 8.85% from 8.86% late Monday.

Analysts said market makers focused on the dollar and sagging oil prices. At one point, crude oil prices were off as much as 30 cents per barrel, helping bond prices firm. But the gains soon were offset by a weakening dollar.

“There were minor movements, but not one big one to move the market,” said Carol Stone, senior economist with Nomura Securities.

Neal Atterman, vice president at Kidder, Peabody & Co., said bond market participants were also watching the debate in Congress over legislation that could eliminate the issuance cap on long-term Treasury bonds.

The U.S. Treasury has not been able to issue more than $270 billion in long-term debt with a coupon of more than 4.25%. Bills in both the House and the Senate contain provisions to repeal the limitation.

Approval of the measures would increase the supply of bonds, resulting in at least modest price reductions, analysts said.

A repeal of the cap is expected this fall or by next spring, Stone said.

In the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 1/32 point higher, intermediate maturities were between 1/16 and 3/16 point higher, while long-term issues were 1/32 point lower, according to Telerate Inc., a financial data service.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 1.11 to 1,152.63.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.313%, down from 8.375% late Monday.