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Bonds Lower in Quiet Trading

May 5, 1998

NEW YORK (AP) _ Bond prices were weakened Tuesday by concerns about a key report this week on the employment market and by a drop in the dollar that discouraged foreign investors from buying U.S. Treasury securities.

The price of the benchmark 30-year Treasury bond closed down 23/32 point, or $7.19 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 5.98 percent from 5.93 percent late Monday.

The long bond’s fall was exaggerated because there was only light trading in the fixed-income market as there was little fresh news on the direction of the economy and inflation.

Investors were awaiting Friday’s release of employment statistics for April. The decline in bond prices suggested there was great concern that the report would show mounting inflationary pressures in the labor market.

Such pressure could prompt the Federal Reserve to raise interest rates, which could hurt bond prices.

In the broader market, prices of short-term securities were down 1/16 point to 1/8 point, while intermediate maturities were down 3/16 point to 11/32 point, reported Dow Jones Markets, a financial information service.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, fell to 1,274.09 from 1,276.89.

Yields on three-month Treasury bills were 5.09 percent as the discount fell 0.02 percentage point from its rate at auction Monday to 4.97 percent. Six-month yields were 5.30 percent as the discount fell 0.01 percentage point from auction to 5.10 percent. One-year yields were 5.42 percent as the discount rose 0.02 percentage point to 5.15 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, fell to 5.00 percent from 5.13 percent.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds fell 3/32 to 121 7/16. The average yield to maturity rose to 5.36 percent from 5.35 percent.

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