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Bonds Rise on Fed Rate Cut Hopes

February 26, 2001

NEW YORK (AP) _ Bond prices rose Monday on speculation that Federal Reserve Chairman Alan Greenspan may signal the need for another interest rate cut during a discussion of monetary policy Wednesday with a House committee.

The price of the benchmark 10-year Treasury note rose 15/32 point, or $4.69 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 5.03 percent compared with 5.09 percent late Friday.

The 30-year Treasury bond rose 9/16 point to yield 5.44 percent, down from 5.48 percent from Friday, according to Bridge Telerate news service.

Bonds gained alongside stocks, which rose in anticipation of Greenspan’s scheduled address before the House Financial Services Committee

Some market observers believe the Fed will cut rates before its next regularly scheduled meeting because of significant declines in the stock market _ the Nasdaq hit a two-year low last week _ and recent economic data showing consumer confidence lagging.

In other trading, short-term Treasury securities rose 5/32, while intermediate maturities rose 9/32 to 3/8.

Yields on three-month Treasury bills were 4.81 percent as the discount fell 0.06 percentage point to 4.70 percent. Six-month yields were 4.65 percent, as the discount fell 0.06 percentage point to 4.49 percent. One-year yields were 4.51 percent as the discount fell by 0.10 percentage point from late Friday to 4.34 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 5.44 percent from 5.50 percent late Friday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was unchanged at 103 3/4. The average yield to maturity was at 5.42 percent, unchanged from Friday.

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