NEW YORK — A sharp rise in commodity prices triggered a moderate selloff in the credit markets Thursday as traders continued to worry about higher inflation.
The Treasury's bellwether 30-year bond ended 3/4 point lower, or $7.50 per $1,000 face amount. Its yield, which moves inversely to its price, jumped to 9.14% from 9.09% late Wednesday.
Short-term yields also increased; municipal and corporate issues lost ground.
Analysts blamed the price decline on an increase in commodity prices, particularly in gold and silver.
Inflation Erodes Bond Values
The Commodity Research Bureau's index of 21 commodities, which is often viewed as an important indicator on inflation, surged 3.25 points to 253.08, its highest level since Dec. 4, 1984.
Inflation is a key enemy to the credit markets because it erodes the value of fixed-income securities such as bonds and notes.
In the secondary market for Treasury bonds, prices of short-term governments fell between 1/8 point and point, intermediate maturities ranged from point to 11/16 point lower and long-term issues were down about 3/4 point, according to figures provided by Telerate Inc., a business 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 daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.35 to 10.13. The Shearson Lehman Hutton daily Treasury bond index, which makes a similar measurement, stood at 1,142.31, down 3.85.
In corporate trading, industrials lost 5/8 point and utilities fell 1/2 point in active trading, according to the investment firm Salomon Bros. Inc.
However, Moody's investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, was up 0.19 to 278.23.
Tax-Exempt Market Dips
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds was down 1/32 point at 87.875 as of 3 p.m. EDT. The average yield rose to 8.14% from 8.13% late Wednesday.
Yields on three-month Treasury bills were up 2 basis points to 6.43%. Six-month bills rose 7 basis points to 6.80% and one-year bills were up 8 basis points at 7.10%. A basis point is one-hundredth of a percentage point.
The federal funds rate, the interest on overnight loans between banks, traded at 7.375%, down from 7.50% Wednesday.
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