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CREDIT : Bond Prices Get Lift From Oil, Interest Rate Outlook

From Associated Press

Bond prices edged up in quiet trading Tuesday on the strength of the dollar, lower oil prices and speculation that the government may not tighten credit in the immediate future.

The Treasury’s benchmark 30-year bond was up 13/32 point, or about $3.75 per $1,000 face amount, while its yield dropped to 9.18% from 9.22% late Monday.

The dollar surged against most major currencies. Meanwhile, oil prices retreated after jumping Monday in a rally incited by the Alaskan oil spill.

“Good news on the dollar and good news on oil prices are helping out the ( bond ) market here,” said Elliott Platt, fixed-income research director at the investment firm Donaldson, Lufkin & Jenrette Securities.

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A strong dollar helps prices of dollar-denominated securities by making them more attractive to foreign investors. Falling oil prices reduce inflationary pressures, which erode the value of bonds.

Platt said he also expects that government reports to be released today will show declines in the index of leading indicators and sales of new single-family homes in February, a sign that higher interest rates may be slowing the economy and curbing the threat of continued inflation acceleration.

In the secondary market, prices of short-term governments were steady to up 1/16 point, intermediate issues were up 1/8 to 7/32 point and long-term maturities were up about 11/32 point, according to Telerate Inc., the financial information service.

The movement of a point equals a change of $10 in the price of a $1,000 bond.

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The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was up 1.45 at 1,115.09.

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 0.18 to 296.20.

Yields on three-month Treasury bills issued Monday fell to 9.37% as the discount fell 5 basis points to 9.04%. Yields on six-month bills issued Monday were unchanged at 9.64% as the discount rose 1 basis point to 9.08%.

The federal funds rate, the interest on overnight loans between banks, traded at 9.875%, unchanged from late Monday.


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