Bonds Mixed After Treasury Auctions Set

While stock prices were falling Wednesday, with the Dow Jones industrial average plunging a record 41.91 points, bond prices were mixed as long-term interest rates fluctuated sharply after the Treasury’s announcement that it would sell $27 billion in new securities next week.

Credit markets were quiet for most of the day as traders awaited the Treasury’s late afternoon announcement of its borrowing plans.

The Treasury said it will sell a record $27 billion of new bonds and notes in its quarterly refunding next week to raise $12.8 billion in new cash. The new money will go toward the $31.4 billion in cash the Treasury has estimated that it will need during the current quarter and to redeem $14.2 billion in maturing debt.

Included in the package will be $9 billion in three-year notes to be sold Tuesday, $9 billion in 10-year notes to be sold Wednesday and $9 billion in 30-year bonds to be sold Thursday.

The refunding package, which topped the previous record quarterly refunding of $23 billion at auctions conducted in early January, exceeded the projections of many credit market analysts, who had estimated sales in the range of $24 billion to $26 billion. But, although the initial announcement pushed long-term bond prices sharply lower, prices regained much of that ground by the end of trading.

‘Favorable Reaction’

“It seems to be a favorable reaction,” said Ed Williams, a trader for Bear, Stearns & Co. “Now that the news is out, we have to find out if there’s any retail, any buyers.”