CREDIT : 30-Year Treasury Bonds Fall at Auction

Bond prices fell Thursday amid lackluster response to the final leg of the Treasury’s $27-billion quarterly auction and in anticipation of an upcoming report on unemployment.

The already outstanding 30-year Treasury bond lost 1/2 point, or $5 per $1,000 in face amount. Its yield, which moves inversely to its price, jumped to 8.44%, from 8.32% late Wednesday.

Separately, the average yield on the $8.76 billion in 30-year notes the Treasury auctioned on Thursday was 8.51%, down from 8.79% at the last auction on Nov. 5 to the lowest level in 12 months.

The Treasury auctioned $9.25 billion in three-year notes on Tuesday and $9 billion in 10-year notes Wednesday as part of regularly scheduled quarterly auctions that enable the government to replenish its coffers and finance the $2.4-trillion national debt.

Analysts noted that the response to Thursday’s auction was not outstanding.

“It could have been better, but this was no surprise,” given the recent price rally and the huge supply of new bonds and notes flooding the market, said John Sebastian, executive vice president at Clayton Brown & Associates in Chicago.

But rather than dwell on the dearth of interest in the Treasury’s latest issue, analysts focused nervous anticipation on the Labor Department’s unemployment report due Friday.

“People are much more afraid of the unemployment numbers” than the auction response, said Jay Goldinger, an investment analyst with Beverly Hills-based Cantor, Fitzgerald & Co.

Economy May Slow

Economists are expecting the government to report an increase in civilian unemployment for December, a further hint that the economy may be slowing.

A drop in bond prices, however, could attract the substantial amount of money currently on the sidelines.

“A lot of people who missed out on the latest rally are wishing that (bond prices) will pull back so they have an opportunity to get into the market,” Goldinger said.

Prices of short-term governments were unchanged to 1/32 point lower, intermediate issues were 1/16 point lower, and 20-year issues were down 11/16 point, according to figures provided by Telerate Inc., a financial information service.

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

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.15 to 113.40. The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 2.07 to 1,184.34.

Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.50 to 282.51.

Among tax-exempt municipal bonds, general obligations and dollar bonds fell 1/2 point to 3/4 point in active trading, according to Merrill Lynch & Co.

Yields on three-month Treasury bills fell 3 basis points to 5.66%. A basis point is one-hundredth of a percentage point. Six-month bills fell 2 basis points to 6.06% and one-year bills fell 2 basis points to 6.24%.

The federal funds rate, the interest on overnight loans between banks, traded at 6.625%, up from 6.50% late Wednesday.

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