Bond Prices Decline in Sluggish Trading As Some Short-Term Interest Rates Rise
NEW YORK -- Bond prices drifted lower in sluggish trading yesterday as some important short-term interest rates climbed.</br></br>The federal funds rate, which is the rate on overnight loans of reserves among banks, hovered between about 7 3/4% and 7 7/8% most of the day. That was up from Friday's average of 7.61% and was slightly higher than some traders expected.</br></br>Prices of some long-term U.S. government bonds fell by about 3/8 of a point, or around $3.75 for each $1,000 face amount. Dealers said trading volume was light mainly because of continued confusion about the economic outlook.</br></br>Several major government economic reports are scheduled to be released this week, including one today on retail sales for July. The average forecast of 16 analysts surveyed by Dow Jones Capital Markets Report showed an increase of 0.1% in retail sales, compared with June's 0.8% decline. But a few analysts expect the report to show a large drop, which they say will convince more investors that the economy remains lethargic and that interest rates will decline further.</br></br>Bankers Trust Co., in its "Key Indicator Forecasts" report, estimated that retail sales last month tumbled "as much as 2%" from June's level. Such a decline would be caused mainly by sluggish car sales, the report said. Also, general merchandise sales "remained sluggish in July, according to what we hear from market sources," the report said.