Interest Rates Continue Their Decline Amid New Evidence of Slower Economy
NEW YORK -- Interest rates continued to tumble yesterday amid fresh evidence that the economy is losing steam.</br></br>The average yield at the Treasury's $4 billion sale of new 20-year, one-month bonds yesterday dropped to 11.69%, the lowest since a similar auction in June 1983. That was down from an average return of 13.76% at the previous sale of similar bonds on July 5.</br></br>Another reduction in the banking industry's prime lending rate appears likely soon, analysts say. Yesterday, First Bank Minneapolis trimmed its base rate on corporate loans to 12 1/4% from 12 1/2%. A smaller bank, National City Bank of Minneapolis, went a step further, cutting its rate to 12%. Most major banks currently are quoting a 12 1/2% rate.</br></br>"We're going to have a 12% prime rate before the month is over and further declines in November to 11 1/2%," predicted Joseph Bench, a vice president and economist at Shearson Lehman/American Express Inc. He said the Federal Reserve System has eased credit conditions in an attempt to bolster the economy.</br></br>"The Fed is troubled by the abrupt downshift in economic growth, and it doesn't want it to snowball into a recession," he added.