Bond prices finished unchanged to slightly higher Friday after a volatile session racked by worse-than-expected employment figures for March and concern over German currency-swap plans.
The Treasury's benchmark 30-year bond closed unchanged from late Thursday at 99.25 while its yield remained at 8.51 percent.Bond prices shot up after the government reported that the growth in non-farm jobs last month was 26,000 - far lower than estimates of about 175,000. The figures implied that "the economy really isn't doing as well as we thought," said Mike Geraty, a bond trader with Clayton Brown & Associates in Chicago.
Signs of economic weakness usually boost bond prices since they imply the Federal Reserve may act to ease interest rates. Lower rates boost the value of existing bonds.
But bond prices dropped as several news reports reached the market, said Wayne Lyski, portfolio manager for Alliance Capital Management.
One report said two unidentified Federal Reserve governors believed economic growth was exceeding target figures, implying they did not believe there was a need to move interest rates lower, Lyski said.
Then news reached the market that the West German central bank expressed concern that a proposed 1-for-1 exchange rate between the West German and East German marks would be inflationary and require higher interest rates.
Higher interest rates in Germany would make investments there more attractive, making it likely that U.S. interest rates would follow suit.
The bond market also was jittery over concern about the weekend meeting of leaders from the seven leading industrialized nations, traders said. Lyski said concern centered around whether the officials would move to increase the value of the Japanese yen against the dollar.
A strengthened yen would make yen-denominated investments more attractive, putting upward pressure on U.S. interest rates.