CREDIT : Bond Prices Edge Higher on Rumors of New Tax in Japan

Bond prices finished slightly higher Tuesday after trading in a narrow range for most of the day in slow trading.

The Treasury’s 30-year bond rose 1/8 point, or $1.25 for every $1,000 in face amount. Its yield, which moves in the opposite direction from its price, slipped to 9.32% from 9.33% late Monday.

Kevin Flanagan, a money market economist for Dean Witter Reynolds Inc., said bonds got a lift in afternoon trading from rumors that Japan may tax certain stock-trading profits.

Flanagan said the rumors helped the dollar post a gain against the Japanese yen and the dollar’s strength helped bond prices. A rising dollar boosts yields on dollar-denominated investments held by foreigners.

“The speculation is that a tax could bring even more Japanese investment into our markets,” he said.

Earlier in the day, the government said orders to U.S. factories fell 3.5% in July while its index of leading economic indicators dropped 0.8%.

But Brian Jones, an economist for Lloyds Bank PLC in New York, said the bond market anticipated the declines. “They were right on what the market expected,” he said.

Concern Over Growth

He said he expects no major moves in bond prices until Friday’s release of the August unemployment report.

Investors have been concerned that economic growth is proceeding at a brisk pace that could lead to an acceleration of inflation. But Jones said the evidence is inconclusive that inflation is picking up.

In the secondary market for Treasury bonds, prices of short-term governments rose 1/16 point, intermediate maturities were up 1/8 point, and 20-year issues rose 7/16 point, according to Telerate Inc., a financial information service.

The movement of a point is equivalent to a change of $10 in the price of a $1,000 bond.

The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 0.80 to 1,128.86.

T-Bill Rates Mixed

In corporate trading, industrials were up. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.46 to 283.41.

Yields on three-month Treasury bills fell to 7.53% as the discount fell 2 basis points to 7.30%. Yields on six-month bills rose to 7.88% as the discount rose 3 basis points to 7.49%. Yields on one-year bills slipped to 8.27% as the discount rate fell 1 basis point to 7.69%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, traded at 8%, down from 8.125% late Monday.

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