Bond Prices Mixed After Conflicting Signals About Economy
Mar. 01, 1995
NEW YORK (AP) _ Treasury bond prices ended mixed Tuesday as investors responded to conflicting reports on the economy's strength.
The price of the Treasury's main 30-year bond rose 5-16 point, or $3.13 cents per $1,000 in face value. Its yield, which moves in the opposite direction, closed at 7.44 percent, down from 7.47 percent late Monday.
Bond prices retreated in the morning after reports suggested inflation was bubbling and the economy was still strong. They recovered somewhat in the afternoon after other reports suggested a slowdown.
Short-term Treasury securities fell 1-32 point to 1-16 point and intermediate maturities ranged from down 1-16 point to up 3-32 point, the Telerate Inc. financial information service reported.
``There was one piece of bad news, but the evidence (generally) is pointing to a slowdown,'' said Hugh Johnson, a vice president with First Albany Corp.
The recovery was fueled by the Johnson Redbook Service survey of national retail sales showing sales down 2.5 percent in the first four weeks of February from January.
That survey complemented the National Association of Realtors report earlier Tuesday that said January sales of previously owned homes fell 4.5 percent to the lowest level in nearly two years.
Market observers also attributed the price gains to optimism about the passage of a balanced budget amendment and investors trying to capitalize on lower prices from earlier in the day.
Bond prices were pressured by the Chicago Purchasing Managers Association survey, which showed inflationary pressures as more companies report paying higher prices for raw materials. Investors feared the increases would trickle down to consumers.
Investors fear inflation because it tends to erode the value of fixed-income securities, such as bonds.
In another report, the Conference Board said its February consumer confidence survey showed that Americans are still fairly positive about business conditions.
``The reports have challenged the conventional wisdom that the economy is slowing down,'' said Dan Seto, economist at Nikko Securities Co. International Inc.
The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, fell 0.72 to 1,208.69.
Yields on three-month Treasury bills rose to 5.92 percent as the discount increased 0.02 percentage point to 5.75 percent. Six-month yields rose to 6.16 percent as the discount rose 0.03 point to 5.91 percent. One-year yields rose to 6.38 percent as the discount increased 0.01 point to 6.03 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, was 6 1/8 percent, down from 6 1/4 percent late Monday.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 90 31-32, unchanged from late Monday. The average yield to maturity also was unchanged at 6.42 percent.