CREDIT : Bond Prices Decline in Seesaw Session

NEW YORK â€”  Bond prices fell in seesaw trading Wednesday in spite of a sharp drop in commodity prices and a rise in the dollar that ordinarily would have boosted the credit market.

The Treasury’s bellwether 30-year issue fell 3/4 point, or about $7.50 per $1,000 in face amount, giving back most of the gains achieved Tuesday. Its yield rose to 8.92% from 8.85% late Tuesday.

Bond traders remained skeptical about the dollar’s strength and nervous about the future of commodity prices in spite of the good news on both fronts Wednesday, analysts said.

Grain and soybean futures prices tumbled on the Chicago Board of Trade as showers in the drought-stricken Midwest created panic in the trading pits and spurred some of the steepest declines in the exchange’s history.

The dollar finished mostly higher against foreign currencies in U.S. trading despite a late selloff incited by rumors of aggressive central bank intervention.

Some Still ‘Gun-Shy’

“The bond market just doesn’t know what to concentrate on,� said Jay Goldinger, who heads an investment banking firm, Capital Insight Inc., in Beverly Hills.

One factor depressing the Treasury bond market was a rumor that the government would issue a 30-year bond at its quarterly refunding auction in August, said F. Ward McCarthy, chief financial economist for Merrill Lynch Capital Markets, who said he did not believe the rumor.

Expectations that a new long bond would not be available had pushed up the price of existing 30-year issues.

David Resler, chief economist for Nomura Securities Inc., said some investors are still “gun-shy� after a sharp decline in bond prices earlier this month that was brought about by concerns about rising interest rates here and abroad.

“The bond market was just whipped around. By the end of the day, it had to feel like Michael Spinks, only it took longer than a minute and 31 seconds,� Goldinger said.

By late Wednesday in the secondary market for Treasury bonds, prices of short-term government issues were unchanged to 3/32 point lower; intermediate maturities fell between 1/8 point and 3/8 point, and long-term issues fell from 3/8 point to 3/4 point, according to figures provided by Telerate Inc., a business information service.

Treasury Bills Drop

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 0.06 to 110.03. The Shearson Lehman Hutton daily Treasury bond index, which makes a similar measurement, stood at 1,150.01, down 2.01.

Corporate issues were little changed to slightly higher. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.12 to 284.50.

Yields on three-month Treasury bills were down 1 basis point to 6.57%. Six-month bills fell 1 basis point to 6.71% and one-year bills were up 1 basis point at 7.01%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, was quoted at 7.75%, up from 7.5625% late Tuesday.

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