CREDIT : Bond Prices Get Lift From Rising Dollar

Bond prices finished mostly higher Monday, taking their cue from strength in the dollar.

The Treasury’s closely watched 30-year bond rose 1/4 point, or about $2.50 for every $1,000 in face amount. Its yield fell to 9.14% from 9.17% Friday.

Bond prices declined early in the day as oil prices shot higher after OPEC ministers meeting in Vienna announced a new agreement to curtail production.

But bonds later bounced back as oil prices reversed course amid skepticism about whether the 13 members of the Organization of Petroleum Exporting Countries would abide by terms of the new production agreement.

Elliott Platt, fixed-income research director for the investment firm Donaldson Lufkin & Jenrette Securities Corp., said bonds derived some strength from the dollar’s rise in foreign exchange trading.

“The dollar had one of its rare good days of late,” he said.

Bonds have been hurt recently by the dollar’s decline, which reduces the value of dollar-denominated holdings for foreign investors. A rising dollar, on the other hand, boosts yields available to foreigners upon conversion into their own currencies.

Platt said the decision by the nation’s biggest banks to boost their prime lending rates by a half percentage point to 10.5% had been expected and caused little reaction in the credit markets.

Short-Term Rates Mixed

Meantime, interest rates on short-term Treasury securities rose in Monday’s auction to the highest level at such sales in more than 3 1/2 years.

In the secondary market for Treasury bonds, prices of short-term government issues rose 1/32 point; intermediate maturities were mixed, with some off 1/16 point and others up 1/16 point, and 20-year issues rose 3/8 point, according to Telerate Inc., a financial information service. The movement of a point 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 0.64 to 1,130.92.

In the corporate bond market, prices also gained ground. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.58 at 293.27.

In tax-exempt trading, prices were unchanged, according to the Bond Buyer municipal bond index.

Yields on three-month Treasury bills held at 8.27%, as the discount was unchanged at 8.01%. Yields on six-month bills were unchanged at 8.57%, as the discount remained at 8.12%. Yields on one-year bills fell to 8.74%, as the discount fell 2 basis points to 8.10%.

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 8.5%, up from 8.375% late Friday.