CREDIT : Bond Prices Cut Early Losses as Dollar Rises

Bond prices finished slightly lower Monday as prices bounced back from an early slide with help from a stronger dollar.

The Treasury’s closely watched 30-year issue slipped 1/8 point, or $1.25 for every $1,000 in face value. Its yield rose to 9% from 8.98% late Thursday.

The government bond market was closed Friday for Veterans Day.

Most bond prices slid sharply in early trading, reflecting nervousness about the dollar’s steep decline overseas.

A declining dollar hurts bond prices because it frightens foreign investors away from U.S. debt securities. This is especially so in Japan, one of the biggest buyers of U.S. Treasury bonds.

But the dollar later rebounded, supported by intervention by the Bank of Japan and the Federal Reserve as well as calming statements from U.S. officials.

The U.S. currency was quoted at 123.75 Japanese yen in late New York trading, up from 122.70 yen late Friday.

“The dollar looked good,” said Mitchell Held, chief financial economist for Smith Barney, Harris Upham & Co. “That was a nice little plus.”

Analysts said the recovery in bond prices was dampened by a Treasury announcement that it will sell $9 billion in new 30-year bonds on Thursday, the first sale of the long-term issue since May. Anticipation of at least a short-term oversupply discouraged some investors from buying bonds, they said.

In the secondary market for existing Treasury securities, prices of short-term government issues declined 1/16 point to 5/32 point, intermediate maturities also fell 1/16 point to 5/32 point, and 20-year issues lost 5/32 point, according to Telerate Inc., a financial information service.

Yields on three-month Treasury bills rose to 8.02% as the discount jumped 12 basis points to 7.77%. Yields on six-month bills advanced to 8.29% as the discount rose 8 basis points to 7.87%. Yields on one-year bills increased to 8.43% as the discount rose 5 basis points to 7.85%.

The federal funds rate, the interest on overnight loans between banks, was quoted late in the day at 8.375%, up from 8.25% Thursday.