CREDIT : Bond Price Rise Extends Last Week’s Big Run-Up

Bond prices pushed higher Monday, extending last week’s big rally, amid growing speculation that the economy is expanding at a moderate pace and that inflation poses no problem.

The Treasury’s closely watched 30-year issue rose 5/8 point, or $6.25 per $1,000 face amount, on top of Friday’s 1 3/4-point gain.

Its yield, which falls when prices rise, dropped to 8.57% from 8.66% Friday.

Analysts said there were no major economic developments or new reports that fueled Monday’s continued rally in the bond market.

“It is mostly a follow-through from Friday’s good economic report,” said Martin Mauro, a money market economist for Merrill Lynch Capital Markets.

Last week, bond prices rallied after the government reported declines in wholesale prices and retail sales last month. Both developments indicated that the Federal Reserve will not likely push interest rates higher.

Mauro said market watchers expect reports this week on consumer prices and housing starts to lend further support to the notion that “we have a soft economy and inflation is manageable.”

Mauro said his firm expects a 0.3% rise in consumer prices in April, compared to a 0.5% gain a month earlier, and housing starts of about 1.35 million, up from 1.32 million in March.

But other analysts said the market could be in for a reversal if upcoming economic reports indicate surges in either the economy or inflation.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 5/16 point to 91 5/16. The average yield to maturity fell to 7.51% from 7.54% late Friday.

The federal funds rate, the interest rate banks charge each other on overnight loans, was 8.25%, up from 8.188% late Friday.

CURRENCY Dollar Closes Mixed in Sluggish Trading The dollar slipped a bit against the Japanese yen but closed mixed against other currencies in sluggish trading Monday.

Currency dealers said the market ignored the drop in interest rates in the bond market and continued strength in stock prices Monday.

They said traders were marking time in anticipation of upcoming government data that could provide a clearer picture of the direction of the economy and interest rates.

“There were just no new fundamental factors today to drive the dollar in any serious direction,” said James T. McGroarty, a senior vice president at Greenwich Capital Markets Inc. in Greenwich, Conn.

The dollar continued to lose ground against the Japanese yen following Friday’s trouncing. Dealers say the yen is gaining support on renewed investor confidence in Japan’s economy.

In Tokyo, where the global trading day begins, the dollar fell to a closing 153.35 Japanese yen from 154.15 Friday. It traded at 152.75 yen in London and 152.50 in New York, down from 152.70 Friday.

The dollar was unchanged to weaker against the British pound. Sterling cost $1.6817 in London, unchanged from Friday, and $1.6825 in New York, up from $1.6790.

Gold prices fell after rising overseas.

On the Commodity Exchange in New York, gold bullion for current delivery settled at $368.40 an ounce, down 40 cents from late Friday. Republic National Bank in New York quoted a late bid for gold at $368.10 an ounce, also 40 cents lower.

COMMODITIES Ivory Coast Unrest Swells Cocoa Prices Cocoa futures prices roared to their highest levels in more than a year in a rally ignited by reports of renewed unrest in the Ivory Coast, the world’s largest producer.

On other commodity markets, oil futures rose sharply, soybeans plunged while grains were mixed, livestock and meat futures were mixed and precious metals were mixed.

Cocoa futures settled $88 to $105 higher on New York’s Coffee, Sugar and Cocoa Exchange, with the contract for delivery in May at $1,389 per metric ton, the highest settlement of a near-month cocoa contract since April 3, 1989.

The rally followed reports that soldiers had temporarily surrounded the presidential palace in the Ivory Coast capital of Abidjan and some radio and television stations. The troops were protesting wages and living conditions.

Protests by various sectors of Ivory Coast society have occurred occasionally since early March--after President Felix Houphouet-Boigny ordered austerity measures to combat economic distress caused by last year’s collapse of cocoa prices.

Houphouet-Boigny has since rescinded some of the measures and has said multiparty elections will be held this year.

Traders remain closely attuned to the Ivory Coast situation and tend to buy futures on signs of unrest, fearing cocoa shipping could be disrupted, analysts said.

“The market is convinced this is a boiling pot,” said Arthur Stevenson of Prudential-Bache Securities Inc.

He said traders fear a new government may not honor longstanding cocoa supply agreements forged during Houphouet-Boigny’s 30-year reign.

Analyst Stephen W. Platt of Dean Witter Reynolds Inc. said buying interest also may have been piqued by bullish comments made over the weekend by Derek Chambers, a trader with Philipp Bros. Inc. The company is believed to be holding a large cash position in cocoa.