NEW YORK — Reversing their weeklong advance, bond prices fell Tuesday in active trading as the stock market rebounded.
The Treasury's closely watched 30-year bond dropped 1 3/4 points, or $17.50 for every $1,000 in face value. Its yield, which moves inversely to its price, jumped to 9.06% from 8.90% late Monday.
The 30-year bond had bolted about 10 points higher over the course of last week, or $100 per $1,000, in the wake of the devastating collapse of world stock markets Oct. 19.
Analysts said Tuesday's rally on Wall Street pushed many investors to shift their funds from bonds back into the stock market--after fleeing plunging stocks for the relative safety of the credit markets through most of last week and Monday.
The bulk of the selling came in the early part of the trading day, however, and bond prices later stabilized, dealers said.
Also contributing to the decline in bond prices, analysts noted, is continuing worry about the dollar, which began falling steeply last Friday amid rumors of an imminent devaluation of the U.S. currency by finance leaders of the seven largest industrial countries.
Those rumors were rekindled Tuesday, with some market participants expecting the "Group of Seven" to meet sometime after the first round of talks between Congress and the White House aimed at reducing the federal budget deficit. The discussions opened Tuesday.
"We've got some concern over the dollar," said Jay Goldinger, an investment broker for Cantor, Fitzgerald & Co. Inc. in Beverly Hills. "There's that black cloud called the dollar that keeps chasing bondholders around the (trading) pit."
The dollar closed at 141.25 Japanese yen Tuesday, down from 142.35 at Monday's close.
A weaker dollar makes Treasury bonds and notes, which are denominated in U.S. currency, less attractive to foreign investors.
In the secondary market for Treasury bonds, prices of short-term government issues fell 3/16 point to 5/16 point, intermediate maturities declined 7/16 point to 1 3/16 points, and 20-year issues dropped 1 1/2 points, according to figures provided by Telerate Inc., a financial information service.
The movement of a point is equivalent to a change of $10 in the price of a bond with a $1,000 face value.
The Shearson Lehman Treasury bond index, which reflects price movements on outstanding Treasury bonds, tumbled 7.14 to 1,151.06. The Merrill Lynch Treasury bond index, which makes a similar measurement, was down 0.76 at 109.93.
Yields on three-month Treasury bills, meanwhile, climbed 13 basis points to 5.23% while six-month bills rose 3 basis points to 5.99% and one-year bills advanced 13 basis points to 6.39%.
Corporate bonds also fell. Moody's investment grade corporate bond index, which measures price movements on 100 corporate bonds with maturities of five years or longer, lost 1.42 at 258.99.
The federal funds rate, the interest banks charge each other on overnight loans, was quoted late in the day at 6.75%, down sharply from 7.375% late Monday.
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