FINANCIAL MARKETS : Bond Yields Hit Another Low; Stocks Lose Ground
Market Overview The yield on the Treasury’s long bond fell to a second consecutive record low, while the rest of the market was unchanged to slightly lower.
Blue-chip stocks succumbed to profit taking after scoring a record close Monday in response to passage of President Clinton’s deficit-reduction plan.
Credit
Bond traders saw the key 30-year bond move into its own orbit Tuesday, when the prices of all Treasury securities advanced.
The yield on the benchmark bond fell to 6.44%, below its Monday closing of 6.46%, the lowest yield since the Treasury began regularly issuing 30-year bonds in 1977. Its price rose 10/32 point, or $3.13 per $1,000 in face value. Yields and prices move in opposite directions.
Active 20-year bonds, which are no longer issued, were last at such low yields in 1972.
The bond market has been buoyed by the prospect of reduced government borrowing with passage of Clinton’s budget in Congress. Much of the interest in the 30-year maturity is attributed to a change, beginning this week, in the way the Treasury Department sells the bond.
The Treasury Department began its quarterly refunding auction Tuesday, selling $16.67 billion of three-year notes. The Treasury will sell a total of $38.5 billion of new securities during the three-day auction.
The new three-year note sold at a high yield of 4.49%, above the 4.27% at the last three-year note sale in May. The bid-to-cover ratio, the ratio of bids accepted by the Treasury to those offered, was 2.73 to 1, down from 2.87 to 1 at the May auction.
Short-term maturities dropped 1/16 point, while intermediate maturities were unchanged to 3/32 point lower, the Telerate Inc. financial information service reported.
The federal funds rate, the interest on overnight loans between banks, was 2.938%, unchanged from Monday.
Stocks
Analysts said the equities market was following its recent pattern, which has been to lose ground after reaching record territory. They said stocks also took their cue from the bond market.
The Dow Jones industrial average dropped 3.35 points to 3,572.73. However, advancing issues beat out decliners slightly on the New York Stock Exchange. Big Board volume totaled 255.52 million shares, compared to 232.50 million on Monday.
The NASDAQ index, which racked up a four-session streak of record closes, also gave up ground, losing 1.41 points to 717.08.
Among the market highlights:
Microsoft lost 2 to 71 on technical factors, traders said.
AMR jumped 1 5/8 to 66 1/4 after a federal jury ruled in favor of American Airlines in a $3-billion antitrust lawsuit brought by two other airlines.
Retail stocks were mostly down following mixed or disappointing earnings reports. Dillard’s department stores lost 2 3/8 to 35. No. 1 retailer Wal-Mart reported earnings in line with predictions, but lost 1/2 to 25.
Among the most active issues, Procter & Gamble was down 1 1/8 to 46 1/4 on the NYSE. The consumer products company reported a fourth-quarter loss of $1.2 billion, mostly due to a restructuring charge related to job cuts and plant consolidations.
In overseas trading, London’s Financial Times 100-share average ended down 14.8 points at 2,971.6. Frankfurt’s 30-share DAX average finished at 1,865.16, down 7.14 points. In Tokyo, the 225-share Nikkei average closed up 0.70 at 20,493.75.
Other Markets
The dollar climbed against most major currencies in light but volatile trading marked by continued skittishness toward most European monies.
The dollar closed in New York at 1.717 German marks, up from Monday’s 1.697 marks. Against the yen, the greenback fell to 104.70 yen from 104.91 on Monday.
Energy futures retreated in sluggish trading on the New York Mercantile Exchange with light, sweet crude oil for September delivery falling 3 cents to close at $17.52 a barrel.
Gold prices were mixed. On the New York Commodity Exchange, gold for current delivery closed at $380.90 an ounce, off $2.40 from Monday’s close. Silver closed at $4.751 an ounce, up 3.6 cents.
Market Roundup, D6
