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CREDIT : Bond Prices Rise After 2nd Look at Fed Inflation Plan

From Associated Press

Bond prices finished higher Tuesday and interest rates fell as the market recovered some of the ground lost last week.

The Treasury’s benchmark 30-year bond rose 3/8 point, or $3.75 per $1,000 face amount, while its yield fell to 9.12% from 9.15% late Monday.

Analysts said the market appeared to shrug off the government’s report that the gross national product rose 2% in the last three months of 1988, matching last month’s estimate of fourth-quarter growth.

But they said the market benefited from a reassessment of last week’s glum view of the Federal Reserve’s ability to contain inflation.

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They said some traders appear to believe that last week’s selloff was overdone. At the same time, Treasury bills, notes and bonds may be attracting money from the stock market, which has steadied this week after a big decline last week.

In the secondary market for Treasury bonds, prices of short-term government bonds rose 5/32 point, intermediate maturities advanced 1/4 point to 11/32 point and long-term issues were up 13/32 point, said Telerate Inc., a 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, rose 2.50 to 1,122.39.

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In the corporate market, prices rose. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.51 to 296.46.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 3/32 point. The average yield to maturity slipped to 7.73% from 7.74%.

Yields on three-month Treasury bills rose to 8.96% as the discount fell 4 basis points to 8.65%. Yields on six-month bills fell to 9.17% as the discount fell 7 basis points to 8.66%. Yields on one-year bills fell to 9.35% as the discount dropped 8 basis points to 8.64%.

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 at 9.813%, unchanged from late Monday.


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