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Bond Prices Higher in Light Trading

January 5, 1987

NEW YORK (AP) _ Bond prices were higher in light trading early today.

The Treasury’s key 30-year issue was up 1/2 point, or $5 for each $1,000 in face value, with its yield falling to 7.35 percent from 7.39 percent late Friday.

Prices for corporate and municipal bonds were unchanged to slightly higher.

The dollar’s recovery on foreign exchange markets today put traders in a buying mood, said Raymond W. Stone, chief financial economist of Merrill Lynch Capital Markets.

However, Stone, noting the light activity, said many dealers were staying away from the bond market while they await new figures indicating the direction the economy will take.

Investors generally view bearish news about the economy as good for the bond market because it could prompt the Federal Reserve Board to stimulate the economy by easing credit restrictions. Bond prices and interest rates move inversely.

In the secondary market for Treasury bonds, prices of short-term governments rose about 1-16 point, intermediate maturities rose about 5-16 point and long-term issues were up nearly 1 point, according to figures provided by Telerate Inc.

The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.

The Merrill Lynch Daily Treasury Index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose .23 to 118.75. The Shearson Lehman Daily Treasury Bond Index, which makes a similar measurement, rose 2.88 to 1,241.77.

In corporate trading, industrials rose 1/2 point and utilities were up 1/ 4 point in light trading, according to the investment firm of Salomon Brothers Inc.

Among tax-exempt municipal bonds, general obligations were unchanged and dollar bonds were up 1/4 point, Salomon Brothers said. Trading was light.

Yields on three-month Treasury bills were up 2 basis points to 5.56 percent. A basis point is one-hundredth of a percentage point. Six-month bills fell 1 basis points to 5.54 percent and one-year bills were unchanged at 5.53 percent.

The federal funds rate, the interest on overnight loans between banks, traded at 6 13-16 percent, up from 6 1/2 percent late Friday.

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