CREDIT : Bond Prices Steady in Cautious Trading
Bond prices finished unchanged to slightly higher Monday in sluggish trading, weighed down by anticipation of the Thanksgiving holiday and uncertainty about the direction of interest rates.
The Treasury’s 30-year bond rose 1/16 point, or less than $1 for every $1,000 in face amount. Its yield fell to 9.10% from 9.14% late Friday.
Analysts said trading was very light before the Thanksgiving Day holiday and a Japanese holiday Wednesday.
Steven A. Wood, an economist for BankAmerica Capital Markets Group in San Francisco, said: “Part of the reason for the whole slowdown is that there is still a lot of confusion over the direction of the economy and the direction of interest rates.”
Wood said weakness in the dollar “limited any gains we could make today” and that the prospect of this week’s auctions of two- and five-year Treasury notes kept some traders on the sidelines.
Today, the government is expected to report on October consumer prices, and many analysts are looking for a rise of about 0.3%.
Secondary Market Mixed
The market will look for evidence that the economy is expanding at a rate that could cause prices to rise more rapidly, a development that could erode the value of fixed-income securities.
In the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 1/32 point lower, intermediate maturities were unchanged to up 3/32 point and 20-year issues were up 5/32 point, according to Telerate Inc., a financial information service.
The movement of a point is equals a change of $10 in the price of a $1,000 bond.
The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.26 to 1,136.13.
In corporate trading, industrials edged up. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.31 to 294.33.
In tax-exempt trading, prices slipped 3/32 point, according to the Bond Buyers municipal bond index.
Yields on three-month Treasury bills rose to 8.24%, with the discount up 4 basis points at 7.98%. The yield on six-month bills rose to 8.42% as the discount rose 4 basis points to 7.99%. Yields on one-year bills advanced to 8.60% as the discount rose 5 basis points to 7.98%.
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 8.318%, up from 8.25% late Friday.
