CREDIT : Bonds Decline as Treasury Auction Ends

NEW YORK — Most government bond prices finished lower Thursday as the Treasury Department completed its latest series of securities auctions with the sale of $8.5 billion in 30-year bonds.

In the market for already outstanding bonds, the price of the Treasury’s previous 30-year issue fell 1/8 point, or $1.25 per $1,000 face amount.

That pushed its yield to 9.22% from 9.20% late Wednesday. Those yields are the highest since mid-December.

Analysts said the auction of new 30-year bonds, which will not actually be delivered until next week, went about as expected at an average yield of 9.17%, the highest level in 15 months.

The average yield was up from 8.51% at the last 30-year bond auction Feb. 4 and was the highest since 30-year bonds averaged 9.28% on Feb. 18, 1986.

“The auction went reasonably well,” said William V. Sullivan Jr., director of money market research for the investment firm Dean Witter Reynolds Inc. He said a preliminary estimate was that Japanese investors had purchased about a third of the bonds, or about their recent share of such issues.

It was the final auction in a series of three sales that the government conducted this week. The Treasury sold $8.75 billion in 10-year notes Wednesday and $8.76 billion in three-year notes Tuesday.

Meanwhile, prices for outstanding issues showed little movement in a session Sullivan described as “extremely quiet.”

Waiting for Reports

He said the market shrugged off the government’s report of a 0.6% decline in retail sales in April. The weakness in the latest figure was offset, Sullivan said, by an upward revision in March retail sales to show an increase of 1.7%.

With the Treasury auction over, Sullivan said traders turned their attention to a pair of economic reports to be released over the next few days, producer prices on today and the trade deficit next week.

“Those reports will call the market tune for the balance of May,” he said. Sullivan was looking for a 0.4% rise in producer prices for April, and a narrowing of the trade deficit to $12 billion in March.

He said the market retains a “tentative, still bearish overtone” that is weighed down by worries that the economy is growing so rapidly that inflation could accelerate and erode the value of bonds.

In the secondary market for Treasury bonds, prices of short-term governments were unchanged, while intermediate and 20-year maturities each fell 1/16 point, according to figures provided by the financial information firm Telerate Inc.

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

Corporates Steady

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.06 to 109.31. The Shearson Lehman Hutton composite index, which makes a similar measurement, fell 0.30 to 1,144.24.

In corporate trading, industrials and utilities were little changed in light trading, according to the investment firm Salomon Bros.

Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.10 to 276.53.

Prices in the tax-exempt market bucked the trend, as revenue and municipal bonds rose 5/32 point.

Yields on three-month Treasury bills fell 1 basis point to 6.22%. Six-month bills rose 2 basis points to 6.43% and one-year bills rose 2 basis points to 6.84%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, traded at 7% late Thursday, down from 7.063% late Wednesday.

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