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Bonds Prices Fall Sharply

March 24, 2003

NEW YORK (AP) _ Bond prices surged Monday as investors, unnerved by reports suggesting the war in Iraq might last longer than expected, looked for less volatile investments.

The price of the benchmark 10-year Treasury note rose 27/32 point or $8.44 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 3.97 percent, from 4.07 percent Friday.

The 30-year Treasury advanced 1 3/8 points, or $13.75, as its yield fell to 4.93 percent from 5.02 percent Friday, according to Moneyline Telerate.

Analysts said the market was growing concerned that Operation Iraqi Freedom might take longer to resolve than originally hoped. Reports over the weekend of resistance from Iraqi troops and the capture of some American soldiers over the weekend added to the unease.

The Dow Jones industrials closed down 307 points at 8,215, giving back nearly one-third of the its 997-point gain from the previous eight sessions in what had been its best showing since October 1982.

The S&P 500 index dropped 32 points to 864, while the Nasdaq composite index lost 52 points to 1,370.

In other bond trading, the price of the benchmark two-year note rose 3/16 point to yield 1.71 percent, down from 1.75 percent a day earlier. Intermediate maturities gained between 5/16 and 22/32 point.

Yields on one-month Treasury bills were 1.18 percent as the discount was unchanged at 1.15 percent. Yields on three-month Treasury bills were 1.17 percent, as the discount held steady at 1.16 percent.

Six-month yields were 1.17 percent, as the discount fell 0.01 percentage point to 1.15 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, rose to 1.25 percent from 1.19 percent a day earlier.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 23/32 to 108 5/8. The yield fell to 5.08 percent from 5.12 percent.

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