Bonds Rise on Strong Dollar
NEW YORK (AP) _ Bond prices rose Thursday, despite some discouraging inflation news, as remarks from Japan’s new finance minister downplaying the importance of intervention in currency markets boosted the dollar.
Traders shrugged off early reports Thursday showing growth in U.S. wages _ an indicator often seen as a danger sign for bonds’ worst enemy, inflation.
The dollar posted sizable gains later in the day after Japan’s incoming finance minister, Kiichi Miyazawa, signaled that stock and currency levels should be determined by market forces, and that market intervention by governments should not occur very often.
Miyazawa’s remarks ignited concerns that Japan may be unlikely to intervene in markets again to support its flagging currency, as it did in concert with U.S. financial authorities in June, and gave the dollar a boost. a stronger dollar makes U.S. assets, such as bonds, more attractive to foreign investors.
The price of the benchmark 30-year Treasury bond rose 22-32 point, or $6.88 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 5.72 percent from 5.76 percent late Wednesday.
In the broader market, prices of short-term Treasury securities were up between 1-32 point and 1-16 point, and intermediate maturities were up 3-16 point, reported Bridge Telerate, a financial information service.
The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, rose 2.35 points to 1,285.50.
Yields on three-month Treasury bills were 5.05 percent as the discount rose 0.01 percentage point to 4.93 percent. Six-month yields were 5.19 percent, as the discount rose 0.01 percentage point to 5.00 percent. One-year yields were 5.35 percent as the discount rose by 0.01 percentage point to 5.09 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 5.69 from 5.50 percent.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose to 123 9-16 from 129 7-16. The average yield to maturity fell to 5.25 percent from 5.26 percent.