Bonds Fall for Fifth Straight Day
Friday, 5 February 1999
N E W Y O R K (AP)
U.S. TREASURY bonds fell Friday for a fifth consecutive day, in its steepest
weekly decline in four months, as a government report of a strong labor
market raised expectations that the Federal Reserve will boost interest
rates later this year.
The price of the benchmark 30-year Treasury bond fell 15/16 point, or
$9.38 per $1,000 in face value. Its yield, which moves in the opposite
direction, rose to 5.35 from 5.29 percent late Thursday.
For the week, 30-year bonds have fallen about 4 points, marking the
worst decline since early October.
The government's first major economic report of the year, issued Friday by
the Labor Department, said the unemployment rate in January held at 4.3
percent, matching a 28-year low.
The report, along with private reports on auto and retail chain sales and
manufacturing activity, shows the U.S. economy last month had
considerable momentum after a growth spurt in the fourth quarter of 1998
that was the strongest in 2 1/2 years.
The resilience in what already is the nation's longest peacetime economic
expansion raises questions about how much longer inflation-fighters at the
Federal Reserve can resist raising short-term interest rates. At the Fed's
most recent meeting, this week, Fed policy-makers decided to leave rates
unchanged.
While inflation has remained dormant, there are fears that a tight labor
market will drive up wages and prices.
Rising interest rates reduce the value of investments with fixed returns, such
as bonds.
Traders are also concerned about how well the market will absorb next
week's auction of $35 billion in new Treasury securities.
In the broader market, prices of short-term Treasury securities were off
between 1/16 point and 5/32 point, and intermediate maturities were down
9/32 point to 17/32 point, reported Bridge Telerate, a financial information
service.
The Lehman Brothers Daily Treasury Bond Index, reflecting price
movements on bonds with maturities of a year or longer, fell 3.08 points to
1,302.82.
Yields on three-month Treasury bills were 4.49 percent as the discount
rose 0.03 percentage point from Thursday to 4.39 percent. Six-month
yields were 4.57 percent, as the discount rose 0.03 percentage point to
4.42 percent. One-year yields were 4.64 percent as the discount rose
0.03 percentage point to 4.43 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,
remained unchanged at 4.75 percent.
In the tax-exempt market, the Bond Buyer index of 40 actively traded
municipal bonds fell 1/16 to 124 7/8. The average yield to maturity rose to
5.15 percent from 5.14 percent. |
