Interest rates were steady on Monday, as the bond market awaited today's government report on consumer prices.

At 4 p.m. in New York, the yield on the Treasury's 30-year bond was 6.8%, up from 6.80% on Friday.

Stocks rose on optimism about the inflation report. The Dow Jones industrial average finished 9.68 points higher at 3,514.69.

The dollar continued to lose ground, as prospects of higher U.S. interest rates faded. The currency finished at 1.6285 German marks, down from 1.6275, and at 105.10 yen, from 106.20.

The bond market rallied on Friday after the government announced that the Producer Price Index was unchanged in May and that retail sales rose only 0.1% that month.

Falling gold prices gave bonds an early lift Monday, but caution ahead of today's inflation report set in later.

The government today is scheduled to release its Consumer Price Index for May. The consensus estimate from economists is for a 0.2% rise.

"This will be viewed with relief in the bond market," said Carl Palash, senior economist at MCM Money Watch.

Impact on Fed's Plans

A moderate rise in the CPI would virtually eliminate any chance that the Federal Reserve will tighten credit in the near term. "Given the PPI, the CPI would have to over 0.5% for the Fed to tighten," Mr. Palash said.

In the short-term sector, the Treasury auctioned a total of $24 billion in three- and six-month bills. The average discount rates were 3.07% and 3.19% respectively. The rates were down from 3.14% and 3.30% at the previous week's auction.

Subscribe Now

Access to authoritative analysis and perspective and our data-driven report series.

14-Day Free Trial

No credit card required. Complete access to articles, breaking news and industry data.