NEW YORK — Bond prices were mostly lower in early trading today as the stock market rebounded smartly from its initial loss and the dollar dropped sharply on world currency markets.
The Treasury's closely watched 30-year bond had dipped about 1/8 point, or $1.25 for every $1,000 in face value, by midday. Its yield, which moves inversely to its price, had edged up to 9.07% from 9.06% late Tuesday.
As on Tuesday, Wall Street's rally spurred some investors to shift their funds from bonds back into the stock market, lowering the demand for bonds and raising interest rates.
The recovery in the stock market "has taken its toll on bond prices," said William Sullivan, director of money-market research for investment firm Dean Witter Reynolds Inc.
Bond prices are also under pressure from the steep slide in the dollar, which hit a seven-year low against the West German mark, a five-year low against the British pound and similar lows against other major currencies in trading today.
Traders say the dollar has been hit by concern over the volatility of the stock market, as well as skepticism about the ability of the major industrial countries to coordinate efforts to bolster the U.S. currency.
A weaker dollar makes Treasury bonds and notes, which are denominated in the U.S. currency, less attractive to foreign investors.
In the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 1/32 point lower, intermediate maturities had declined by 1/32 point to 5/32 point, and 20-year issues had lost 1/8 point, 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 Merrill Lynch Treasury bond index, which reflects price movements on outstanding Treasury bonds, had edged up 0.01 to 109.94. The Shearson Lehman Treasury bond index, which makes a similar measurement, was up 0.05 at 1,151.11.
Yields on three-month Treasury bills, meanwhile, had dropped 12 basis points to 5.06% while six-month bills had fallen 8 basis points to 5.89% and one-year bills had lost 12 basis points at 6.27%. A basis point is a hundredth of a percentage point.
In corporate trading, industrials had declined 1/8 point and utilities were unchanged in light activity, according to investment firm Salomon Bros. Inc.
Moody's Investment Grade Corporate Bond Index, which measures price movements on 100 corporate bonds with maturities of five years or longer, had slipped 0.56 to 258.43.
The federal funds rate, the interest banks charge each other on overnight loans, was quoted at 6.75%, unchanged from late Tuesday.