CREDIT : Fed Chief’s Comments, Dollar’s Fall Sink Bond Prices
Bond prices ended slightly lower Tuesday, pressured by a falling dollar and some market disappointment with remarks by Federal Reserve Board Chairman Alan Greenspan.
The Treasury’s closely watched 30-year bond edged down 1/32 point, or less than $1 for every 1,000 in face value. Its yield, which moves in the opposite direction from its price, held at 9.05%, unchanged from late Friday.
The credit markets were closed Monday in observance of the Presidents’ Day holiday.
Analysts said bonds were weakened by the decline of the dollar in world currency trading.
“The dollar has taken a beating,” said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc.
A falling U.S. currency tends to erode the value of dollar-denominated securities such as bonds and notes.
In addition, congressional testimony Tuesday by Fed Chairman Greenspan failed to completely convince the market that he is serious about fighting inflation, analysts said.
They said that while Greenspan’s testimony before the Senate Banking Committee demonstrated a commitment to the battle against inflation, financial markets had hoped for something stronger.
“Greenspan needs to come out and show his colors,” said Jay Goldinger, a principal of Capital Insight Inc., an investment firm in Beverly Hills. “You’ve got a lot of doubting people out there.”
In the secondary market for Treasury bonds, prices of short-term government issues were down 1/32 point to up 1/16 point, intermediate maturities slipped 1/32 point to 3/32 point and long-term issues declined 1/8 point, according to figures provided by Telerate Inc., a financial information service.
The movement of a point is equivalent to 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 0.59 to 1,126.69.
In corporate trading, industrials rose. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, was up 0.48 at 297.66.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 1/4 point to 91.125. The average yield to maturity declined to 7.68% from 7.70% late Friday.
Yields on three-month Treasury bills rose to 8.75% as the discount edged up 1 basis point to 8.47%. Yields on six-month bills fell to 8.99% as the discount declined 2 basis points to 8.51%. Yields on one-year bills rose to 9.25% as the discount increased 1 basis point to 8.55%.
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 9.313%, up from 9.25% late Friday.
