Bond Prices Surge as U.S. Completes Financing That Drew Positive Response
NEW YORK -- Bond prices surged yesterday as the government completed a massive $17 billion borrowing operation that drew an enthusiastic response from investors.</br></br>Prices of some actively traded Treasury bonds rose by almost a point, or nearly $10 for each $1,000 face amount. In the past two sessions, these issues have regained about one-third of the losses suffered in the previous five days. Interest rates on short-term Treasury bills declined yesterday.</br></br>The Treasury yesterday sold $4.51 billion of new 20-year, one-month bonds at an average annual yield of 10.75%. That was down from 12.04% at the previous auction held March 28. The Treasury received a total of $13.53 billion of bids. That was up sharply from $10.7 billion received at the March auction, when $4.26 billion of bonds were sold.</br></br>The bond sale was the third and final part of the government's financing. The Treasury sold $6.54 billion of new four-year notes Tuesday at an average annual yield of 9.72% and $6.02 billion of new seven-year notes Wednesday at an average yield of 10.4%.</br></br>The Federal Reserve System late yesterday reported a $1.5 billion decline in the nation's money supply for the week ended June 17. But the decline, which was the first following six weekly increases, had been widely anticipated and had little effect on bond prices. Even with the decline, the basic money supply, known as M1, remains far above the Fed's target range, which calls for 4% to 7% growth this year.