CREDIT : Bonds Mixed as Traders Wait for News
Bond prices were mixed Monday as the market awaited two government reports Friday that could provide clues on the direction of inflation.
The Treasury’s benchmark 30-year bond fell 7/32 of a point, or about $2.19 per $1,000 face amount, while its yield rose to 9.05% from 9.03% late Friday.
“The dollar rose, and gold and silver and platinum prices declined, assuaging fears of inflation,” said Irwin L. Kellner, chief economist at Manufacturers Hanover Trust Co.
“I don’t expect any fireworks in the bond market until Friday,” when the government releases wholesale prices and retail sales figures for December, he said.
Maury Harris, chief economist at Paine Webber Inc., said the bond market was whipsawed by the dollar, which rose in early trading against the yen and West German mark but lost some of its gain in the afternoon. The change was attributed to remarks by West German central bank President Karl Otto Poehl calling for a stronger mark.
Industrials Up
Harris and other market watchers also said there was concern about whether the Federal Reserve was tightening the money supply.
In the secondary market for Treasury bonds, prices of short-term governments ranged from 1/16 point lower to 1/16 point higher, intermediate maturities ranged from 1/32 point to 1/8 point lower and long-term issues were down from 1/32 to 1/4 point, according to Telerate Inc., the financial information service.
The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.34 to 1,127.98.
In corporate trading, industrials were up. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.62 to 294.30.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was up 3/32 of a point to 91-9/32 as of 3 p.m. EST. The average yield to maturity fell to 7.77% from 7.78% late Friday.
Fed Fund Rate Rises
In Washington, interest rates on short-term Treasury securities sold at auction Monday rose to the highest level in more than 3 1/2 years.
In the secondary market, yields on three-month Treasury bills fell to 8.52% as the discount fell 2 basis points to 8.25%. Yields on six-month bills rose to 8.97% as the discount rose 2 basis points to 8.49%. Yields on one-year bills fell to 9.15% as the discount fell 1 basis point to 8.48%.
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, traded at 9.125%, up from 9.063% late Friday.
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