Treasury bond prices rose Friday as investors sensed a buying opportunity and traders began to believe the economic upturn may be losing steam.
The price of the Treasury's key 30-year bond, which fell 1-32 point Thursday, climbed 5/8 point, or $6.25 per $1,000 in face amount, by closing. Its yield, which moves in the opposite direction from price, fell to 7.79 percent from 7.84 percent late Thursday.Analysts said the market largely ignored several economic reports released Friday.
Among them, the Commerce Department said the nation's gross domestic product grew at an annual rate of 0.8 percent in 1991's fourth quarter, up from the earlier estimate of 0.3 percent.
But a large part of the increase came from a buildup in inventories. Higher stockpiles left analysts fearing short-term production cuts to work down the backlog.
In other reports, a group of corporate purchasing managers in Chicago reported their monthly index of economic activity fell in February. But a similar report from Detroit purchasing managers showed a sharp gain.
Kevin Flanagan, a money market economist at Dean Witter Reynolds Inc., said he viewed the revised GDP report as neutral for the economy. He also discounted the two purchasing managers' reports, saying it was hard to extrapolate for the entire economy.
"We really didn't get any news that would serve as a catalyst for the type of (bond) buying we saw," he said.
Instead, Flanagan traced the buying to the relatively attractive prices of bonds "plus a slight change in attitude that the recovery is not going to take hold as soon as some hoped."
He said some experts had believed the Federal Reserve may have to raise interest rates to control inflation if the economy improves. Higher rates usually hurt the value of existing bonds.
In the secondary market for Treasury bonds, short-term maturities closed 7-32 point to 11-32 point higher, intermediate maturities were 5-16 point to 1/2 point higher, and long-term issues rose 5/8 point to 11-16 point, the Telerate Inc. service reported.
The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.
The Lehman Brothers Daily Treasury Bond Index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 3.98 to 1,229.98.
Yields on three-month Treasury bills rose to 4.03 percent as the discount rose 1 basis point to 3.93 percent. Yields on six-month bills rose to 4.12 percent as the discount rose 2 basis points to 3.98 percent.