CREDIT : Treasury Auction Puts Damper on Bond Prices

Bond prices finished mostly higher Wednesday but slipped from the day’s peaks after the Treasury’s afternoon auction of 10-year notes.

The Treasury’s bellwether 30-year bond finished up a full point, or about $10 for every $1,000 in face value, and its yield fell to 8.93% from 9.03% late Tuesday.

The prices of 30-year bonds were up nearly $15 for every $1,000 in face value earlier in the day as the stock market continued its slump. The Dow Jones industrial average wound up down 18.24 at 1,945.29.

But bond prices retreated after the Treasury announced the results of the second phase of this week’s sale of $23.75 billion in new securities.

The Treasury said it sold $9.25 billion in 10-year notes at an average yield of 8.88%, the highest level since yields at a February, 1986, action were 8.97%.

William V. Sullivan, director of money market research at Dean Witter Reynolds, said the auction results were disappointing.

He said there were fewer offers for the notes than normal and said that suggested that “there is a lack of confidence that rates can remain low.”

The results also suggested, Sullivan said, that foreign investors may not have participated as eagerly as they have in the past in the auctions, a possible reflection of the chilling effect of the recent decline in the dollar.

The Treasury wraps up its three-part auction today with the sale of $4.75 billion in 30-year bonds. It sold sold $9.75 billion in three-year notes Tuesday.

In the secondary market for Treasury bonds, prices of short-term government issues were unchanged; intermediate maturities were up by between 1/8 point and 3/8 point, and 20-year issues rose 1/2 point, according to Salomon Bros.

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

Yields on three-month Treasury bills, meanwhile, fell 5 basis points to 5.52%; six-month bills fell 3 basis points to 6.0%, and one-year bills slid 5 basis points to 6.38%, according to the financial information service Telerate Inc. A basis point is a hundredth of a percentage point.

In the corporate bond market, industrial and utility issues rose point in light trading.

The federal funds rate, the interest banks charge each other on overnight loans, was quoted at 6%, down from 6.675% late Tuesday.