U.S. bonds edge lower, but rally expected to continue

August 18, 1993|By Bloomberg Business News

U.S. bonds edged lower in light trading but probably will continue to rally as investors remain confident that inflation is in check.

After yields fell to a record 6.27 percent yesterday, the benchmark 30-year bond lost 5/32, or 94 cents per $1,000 bond. The closing yield was 6.31 percent, up from Monday's 16-year low of 6.30 percent.

The drop to 6.27 percent marked the seventh straight day that the record tumbled.

Investors say rates will keep declining because inflation, now running at 2.8%, isn't heading higher. A falling inflation rate enhances thevalue of fixed-rate securities.

That bonds didn't gain today is no indication that the three-week rally from 6.7 percent is over. Trading was light, traders said.

"The buying seems to have abated, but it's nothing that suggests the rally is not intact," said Lawrence Leuzzi, managing director at S.G. Warburg & Co.

As the yield gets closer to 6.25%, it will become harder and harder for people to commit to the bond market, Mr. Leuzzi said. "Progress from these levels will be relatively slow," he said.

The Treasury said in May that it will sell bonds twice a year instead of quarterly, beginning this month.

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