Tuesday, December 30, 1997

Tuesday, December 30, 1997

Tuesday, December 30, 1997

Bonds prices dip in light trading

By JOHN HENDREN AP Business Writer

NEW YORK (AP) - Bond prices dipped in light trading Monday, as investors continued to make modest year-end adjustments.

The price of the benchmark 30-year Treasury bond fell 9-32 point, or $2.81 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 5.92 percent from 5.90 percent on Friday.

Analysts said investors continued to wrap up their 1997 portfolios, with some traders collecting profits on the year's strong rise in prices. Many predicted light trading for the remainder of the week, as investors continued holiday vacations.

"This is a time when people really begin to assess the goals of their portfolios, said Dan Seto, an economist with Nikko Securities International Co. in New York, who expects "a very thin week" in trading volume.

As bonds sagged, encouraging news of help for South Korea's economic crisis sent stocks sharply higher. South Korean lawmakers passed a financial reform package Monday to boost international confidence in the country, and a group of the world's biggest banks met to consider helping South Korean companies afloat by renewing loans or extending more credit.

The talks were a crucial part of a broad plan to speed up financial assistance to South Korea, a push that has boosted confidence in recent days that the country will avoid a financial meltdown.

Some traders speculated that the news may have curbed a recent flow of money from stocks to bonds, but noted that the move was small.

"It's hazardous to come up with any explanation other than random book-squaring," said Raymond A. Worseck, chief economist, A.G. Edwards & Sons Inc. in St. Louis. "I don't think you're going to see much action until next week, when everyone gets back to work."

In the broader market, prices of short-term Treasury securities were unchanged to down 1-32 point while intermediate maturities fell by 1-16 point to 1/8 point, reported Dow Jones Markets, a financial information service.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, closed at 1,277.53, down from 1,279.13 Friday.

Yields on three-month Treasury bills rose to 5.38 percent as the discount rose 0.07 percentage point to 5.25 percent. Six-month yields rose to 5.47 percent, as the discount rose 0.03 point to 5.26 percent. One-year yields rose to 5.52 percent as the discount rose 0.02 percentage point to 5.25 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, rose to 5.56 from 5.44 percent from late Friday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds fell 1-32 to 123 15-16 while the average yield to maturity was 5.24, up from 5.23 Friday.