Bond prices reversed course in mid-session Friday to finish with a gain after losing ground in the morning.
The Treasury's bellwether 30-year bond rose 9/16 point, or $5.63 per $1,000 in face amount. Its yield fell to 8.28 percent from 8.33 percent late Thursday.Marilyn Schaja, money market economist at Donaldson, Lufkin & Jenrette Securities Corp., said the rise appeared linked to the dollar's increase on news of a narrower U.S. trade deficit in March.
The trade gap shrank to $4.05 billion in March, the smallest in almost eight years. The sign of a stronger U.S. economy helped push up the dollar against major currencies. A stronger dollar means cheaper imports and less inflationary pressure, the No. 1 fear of fixed-income investors.
Samuel Kahan, chief economist at Fuji Securities Inc., said the bond price fluctuation was probably due to some random movement.
"It went down because it's silly and it went up because it's silly," he said.
Kahan said the bond market seems to be concerned that an economic recovery is coming and will bring higher inflation.
In light of those inflation concerns, investors sought a higher yield. Kahan said that as the yield reached 8.30 percent to 8.40 percent, people were attracted to the market and started buying, driving yields back down.
In the secondary market for Treasury bonds, short-term maturities were unchanged or up 1/32 point, intermediate maturities rose 1/8 to 19/32 point and long-term issues were up 9/16 point to 21/32, the Telerate Inc. financial information service reported.
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 Lehman Brothers Daily Treasury Bond Index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 2.44 to 1,184.10.
Yields on three-month Treasury bills rose to 5.57 percent as the discount rose 1 basis point to 5.41 percent. Yields on six-month bills fell to 5.82 percent as the discount fell 1 basis point to 5.57 percent. Yields on one-year bills rose to 6.13 percent as the discount rose 1 basis point to 5.78 percent.