Bond Prices End Day Little Changed Amid Lingering Confusion on Fed Policy
NEW YORK -- Stocks and bonds moved in different directions again yesterday. While stocks surged, bond prices generally wound up little changed or slightly lower in sluggish activity.</br></br>For most of the day, Treasury bond prices were lower. But they staged a mild rally late in the afternoon to finish at about the same levels as Monday. The latest 30-year Treasury bonds traded late yesterday at a price of 96 13/32 to yield 9.23%. Late Monday, the issue was quoted at 96 15/32 to yield 9.22%.</br></br>Lingering confusion about whether the Federal Reserve is tightening credit continued to unnerve some bond traders. They say the Fed has dropped hints that it might be pushing short-term interest rates slightly higher as part of a government effort to strengthen the dollar. But many economists insist the Fed hasn't changed policy at all and that the recent rate increases will prove short-lived.</br></br>"This notion that the Fed has taken a tightening action looks to me like a false alarm," said Robert G. Dederick, executive vice president at Northern Trust Co. in Chicago. "When you are still stumbling around in the dark regarding the strength of the economy, that is not the time to tighten credit." Fed policy, he said, can best be described as "steady-as-you-go."</br></br>This view was bolstered by a decline yesterday in the closely watched federal funds rate. The funds rate, which strongly influences many other rates, is widely viewed as the best barometer of Fed policy.