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TREASURY BOND PRICES DOWN OR UNCHANGED ON LIGHT DAY

Treasury bond prices Friday were unchanged or down slightly on a light day in which traders were unwilling to stake new positions before interest rate policymakers meet.

The price of the Treasury's main 301/4-year bond was unchanged with its yield holding at 7.78 percent, the same as Thursday.With no new economic data and other investments moving within expectations, the bond market held steady in advance of the Federal Reserve's Open Market committee meeting Tuesday.

Traders have become cautious about the likelihood that the committee will raise interest rates for the sixth time this year. Recent economic reports suggested stronger economic growth and propensity for inflation, making it more likely that the Fed could raise rates for a sixth time this year.

"There's a lot of uncertainty with respect to what the Fed will decide to do," said Kevin Flanagan, money market economist at Dean Witter. "I don't think any investors want to take any new positions in front of such an event."

Bond prices plunged a week ago after the government reported a surge in the nation's industrial production. That report raised fears of inflation, which erodes the value of fixed-term investments like bonds.

The market tried several times to push prices higher and yields lower this week but failed.

"Week over week, we're pretty much unchanged," said Jim Kenney, head government securities trader at Prudential Securities. "We could not make any progress on the upside."

Shorter-term securities fell a bit Friday, influenced by a rise in commodity prices, which are watched as a sign of inflation. The Commodity Research Bureau's price index rose .64 to 232.73.

One-year and two-year Treasuries fell 1-16 point and intermediate maturities fell 1-32 point to 3-32 point, the financial information service Telerate Inc. reported.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, fell 0.96 to 1,196.54.

Yields on three-month Treasury bills were unchanged at 4.89 percent as the discount held at 4.78 percent. Six-month yields went up to 5.40 percent as the discount rose .02 point to 5.20 percent. One-year yields rose to 5.88 percent as the discount was up .02 point to 5.56 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 43/4 percent, down from 4 13-16 percent late Thursday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 89 20-32, down 3-32 from Thursday. The average yield to maturity was unchanged at 6.53 percent.