CREDIT : Bond Prices Fall as Jobless Data Has Continued Effect

Bond prices fell Monday as the market continued to react to the surprising strength shown in the October unemployment figures released last week.

The Treasury’s bellwether 30-year bond dropped about 1/2 point, or $5 for every $1,000 in face value. Its yield, which is often is a key indicator of interest rate trends, jumped to 8.95% from 8.90% late Friday.

Yields on shorter-term bonds also rose.

The government reported Friday that the nation’s jobless rate fell to 5.3% in October, the lowest level in 14 years.

The lower-than-expected unemployment rate and healthy growth of about 300,000 new jobs fueled bond investors’ concern that the economy is not slowing down as anticipated.

“The unemployment number has become the wall that you can’t penetrate, and unfortunately it fell on everyone,” said Jay Goldinger, a principal of Capital Insight Inc., an investment firm in Beverly Hills.

A more vibrant economy signals higher inflation, which erodes the value of fixed-income securities such as bonds and notes. Higher inflation also suggests that the Federal Reserve might move to tighten credit by raising interest rates.

The report triggered a bond selloff Friday, and analysts said it spilled over into Monday’s trading.

Secondary Market Down

“It’s a little bit of a carry-over,” said Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc.

In the secondary market for Treasury bonds, prices of short-term government issues slipped 1/8 point to 3/16 point, intermediate maturities were down 7/32 point to 7/16 point and 20-year issues fell 11/32 point, according to Telerate Inc.

Corporate bonds also were lower. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.63 to 295.33.

Fed Funds Rate Up

Yields on existing three-month Treasury bills, meanwhile, rose to 7.71% as the discount edged up 1 basis point to 7.48%. Yields on six-month bills increased to 8.08% as the discount rose 4 basis points to 7.68%. Yields on one-year bills advanced to 8.28%, with the discount up 5 basis points at 7.71%.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.25%, up from 8.188% late Friday.