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Treasury Bond Prices Steady

July 1, 1998

NEW YORK (AP) _ Bond prices remained unchanged Wednesday, with investors showing little surprise over a Federal Reserve Board panel’s decision to leave interest rates untouched.

The price of the benchmark 30-year Treasury bond held steady as its yield remained at 5.62 percent.

The Fed’s monetary policy panel _ the Federal Open Market Committee _ concluded a two-day private meeting, signaling it had left the benchmark rate on overnight loans between banks unchanged at 5.5 percent. It’s been at that level since a quarter of a percentage point increase in March 1997.

The decision was widely anticipated and financial markets showed little reaction. Raising U.S. rates would have risked destabilizing already-rocky Asian financial markets by giving investors another reason to transfer their money to the United States.

Plus, the American economy appears to be slowing on its own from growth rates that could generate inflation pressures if they persisted. And consumer price inflation, running at a 1.5 percent annual rate during the first five months of the year, appears well-contained.

In the broader market, prices of short-term Treasury securities were up between 1/32 point and 3/32 point, and intermediate maturities were up 3-32 point to 5-32 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, was 1,291.38, up 1,290.63, up 0.75.

Yields on three-month Treasury bills were 5.08 percent as the discount fell 0.01 percentage point to 4.96 percent. Six-month yields were 5.21 percent, as the discount fell 0.02 percentage point to 5.02 percent. One-year yields were 5.34 percent as the discount fell by 0.02 percentage point from late Tuesday to 5.08 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 7.00 percent, from 6.00 late Tuesday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose to 123 29-32 from 123 7/8. The average yield to maturity was 5.23 percent, up from 5.22 percent.

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