Decline sparked by worries about inflation and ratesBond prices fell Friday as a robust employment report sparked worries about inflationary pressures and an interest rate increase by the Federal Reserve.
The price of the benchmark 30-year Treasury bond fell 11/32 point, or $3.44 per $1,000 in face value. Its yield, which moves in the opposite direction, rose to 5.98 percent from 5.95 percent late Thursday.Prices fell after the Labor Department said the unemployment rate slipped in April to 4.3 percent, the lowest since 1970, and wages were rising at levels that might make the Fed uneasy about higher inflation.
Both inflation and higher interest rates, which are used by the Fed to cool the economy and prevent prices from skyrocketing, erode the value of bonds and other fixed-income assets.
April's 0.4 percentage point drop in the jobless rate was the steepest monthly decline since May 1984 and came as the businesses created 262,000 new jobs - a sign the Asian crisis isn't dampening growth as much as expected.
Nevertheless, there were some encouraging signs that manufacturing could be suffering. Manufacturing employment declined by 10,000 jobs in April, its third straight month of weakness.
Friday's report also showed that average hourly earnings rose 4 cents to $12.67, up 4.4 percent from a year ago. However, so far, manufacturers have refrained from passing on those increases to consumers.
In the broader market, prices of short-term securities were down 1/16 point, while intermediate maturities were down 3/16 point to 7/32 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, fell to 1,274.66 from 1,276.21.
Yields on three-month Treasury bills were 5.10 percent as the discount rose 0.01 percentage point to 4.98 percent. Six-month yields were 5.33 percent as the discount rose 0.03 percentage point to 5.13 percent. One-year yields were 5.42 percent as the discount rose 0.02 percentage point to 5.15 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 5.63 percent from 5.38 percent.
In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 1/32 to 1213/4. The average yield to maturity held at 5.34 percent.