Bond prices rose Friday on optimism about the Treasury's successful quarterly auction and signs that the Federal Reserve may ease interest rates further, traders said.
The Treasury's bellwether 30-year bond rose 3/4 point, or $7.50 per $1,000 in face amount. Its yield, which moves in the opposite direction to price, fell to 7.95 percent from 8.06 percent late Thursday.Traders said the successful conclusion this week of the Treasury's three-part quarterly refunding auction set the stage for the bond market's tone Friday.
The Treasury's sale Thursday of $11 billion in 30-year bonds did not attract overwhelming buying interest, but it was not considered a poor showing, said James Marshall, a trader with the Chicago investment firm Clayton Brown & Associates.
The refunding began Tuesday with the sale of $12.65 billion of three-year notes and continued Wednesday with the auction of $11 billion of 10-year notes.
The large debt auctions are held four times a year to replenish the government's coffers. This quarter's refunding was $250 million larger than the previous record set last November.
Bond prices have been rising since the Federal Reserve reduced a key lending rate, the discount rate, last week. Some experts believe the central bank will lower interest rates even further to boost the sluggish economy.
Lower rates boost the price of bonds, since rates move in the opposite direction of price.
Marshall said a Fed report released Friday that showed credit requirements were tightened at the nation's banks in the fourth quarter added to the market's belief that lower interest rates may be on the way.
"There's no sign of the recession easing up at all," he said.
In the secondary market for Treasury bonds, short-term maturities were up 1-32 point to 3-16 point, intermediate maturities rose 11-32 point to 19-32 point, and long-term issues rose as much as 29-32 point, the Telerate Inc. financial information service reported.
The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.
The Lehman Brothers Daily Treasury Bond Index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 3.31 to 1,201.32.