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Bond Prices Soar

September 3, 2002

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NEW YORK (AP) _ Bond prices soared Tuesday as investors bailed out of the stock market to seek safer investments, and the yield on the benchmark 10-year Treasury note fell to its lowest point in nearly 40 years.

The price of the 10-year note rose 1 3/8 points, or $13.75 per $1,000 in face value. Its yield, which moves in the opposite direction, fell to 3.97 percent, from 4.13 percent Friday. The last time it was that low was May 31, 1963, according to The Bond Market Association, an industry group. The bond market was closed Monday for the Labor Day holiday.

The 30-year Treasury bond jumped 1 15/16 points and its yield fell to 4.81 percent from 4.93 percent on Friday, according to Moneyline Telerate.

The Dow Jones industrial average closed down 355 points to 8,308 points. It was the largest one-day loss since July 19, when the Dow dropped 390 points.

The Nasdaq composite index declined 51 points to 1,264, after falling 4.8 percent in the previous week to end three weeks of gains.

Investors were skittish over a series of developments ranging from lower-than-expected manufacturing activity to brokerage downgrades of Citigroup Inc. and Ford Motor Co.

In other bond trading, the 2-year note rose 5/16 point to yield 1.98 percent, down from 2.15 percent Friday. Intermediate maturities ranged from being down 1/32 to a gain of 1/16 point.

Yields on one-month Treasury bills were 1.69 percent as the discount fell 0.01 percentage point to 1.66 percent. Yields on three-month Treasury bills were 1.63 percent as the discount fell 0.06 percentage point to 1.61 percent. Six-month yields were 1.60 percent as the discount fell 0.05 percentage point to 1.58 percent.

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

The federal funds rate rose to 1.88 percent from Friday’s 1.81 percent.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was 108 3/16, up from 107 21/32 Friday. The average yield to maturity fell to 5.09 percent from 5.12 percent.

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