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Treasury Bond Prices Tumble

June 23, 2000

NEW YORK (AP) _ Treasury bond prices tumbled Friday amid competition from corporate bonds and worries about inflation.

The price of the benchmark 10-year Treasury note fell 5/8 point, or $6.25 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 6.18 percent from 6.10 percent on Thursday.

The 30-year Treasury bond fell 1 1/16 points, and its yield climbed to 6.03 percent from Thursday’s 5.96 percent, according to Bridge Telerate news service.

Analysts said traders sold government bonds in favor of higher-yielding corporate debt securities.

Investors are also concerned that rising oil prices will revive inflation, which erode the value could prompt the Federal Reserve to raise interest rates again. Federal Reserve policymakers meet Tuesday and Wednesday to decide whether to raise interest rates for the seventh time in a year.

Higher interest and rising inflation both hurt bonds, which pay a fixed rate of return over a long period.

In other trading, short-term Treasury securities fell in range of 3/32 point to 1/8 point, while intermediate maturities fell by between 9/32 point and 7/16 point.

Yields on three-month Treasury bills were 5.83 percent as the discount rose 0.02 percentage point from Thursday to 5.68 percent. Six-month yields were 6.19 percent, as the discount rose 0.03 percentage point to 5.93 percent. One-year yields were 6.17 percent as the discount rose 0.03 percentage point to 5.84 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, fell to 6.44 percent from 6.50 percent on Thursday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds fell 13/32 to 95 29/32. The average yield to maturity was 5.93 percent, up from 5.90 percent on Thursday.

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