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Bonds Prices Keep Falling

November 9, 1999

NEW YORK (AP) _ Bond prices continued to fall Tuesday, as a wave of new issues reduced demand and investors remained concerned that Federal Reserve policy-makers will raise interest rates next week for a third time this year.

The price of the benchmark 30-year Treasury bond fell 1/4 point, or $2.50 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 6.07 percent from Monday’s rate of 6.05 percent.

Analysts said bond prices aren’t likely to rally again until after the Fed meets next week to decide whether another interest rate hike is needed to prevent a potential rise in inflation.

Traders are also looking ahead to the release on Wednesday of the Producer Price Index, a key inflationary gauge. A sharp increase in the index would signal that inflation is rising and provide grist for those investors who believe the Fed will increase interest rates.

In the broader market, prices of short-term Treasury securities fell 1/16 point to 3/32 point, and intermediate maturities fell 3/32 point to 3/16 point, reported Bridge Telerate, a financial information service.

Yields on three-month Treasury bills were 5.18 percent as the discount rose 0.02 percentage point from Monday’s auction price to 5.04 percent. Six-month yields were 5.36 percent, as the discount rose 0.02 percentage point from Monday’s auction price to 5.14 percent.

One-year yields were 5.46 percent as the discount rose by 0.01 percentage point from late Monday to 5.17 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 unchanged at 5.19 percent.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds fell 3/32 to 110 25/32. The average yield to maturity rose to 6.00 from 5.99 percent on Monday.

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