CREDIT : Bonds Drop as Hopes for Lower Interest Rates Fade

Bond prices slipped Tuesday along with hopes for an imminent decline in interest rates.

The Treasury’s 30-year bond fell 3/8 point, or $3.75 for every $1,000 in face value, as its yield edged up to 8.46% from 8.43% on Friday.

Trading was moderate, and prices finished above their lows for the day.

William Sullivan, director of money market research for the investment firm Dean Witter Reynolds, said the market “absorbed selling pressure from abroad” as foreign investors got their first chance to react to last week’s trade report.

In the secondary market for Treasury bonds, prices of short-term governments fell 3/22 point, intermediate maturities declined point and 20-year issues fell 5/16 point, according to the financial information service Telerate Inc.

The Merrill Lynch daily Treasury index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.18 to 113.14. The Shearson Lehman daily Treasury bond index, which makes a similar measurement, fell 2.14 to 1,183.03.

In corporate trading, industrials fell 1/2 point and utilities slipped point in light activity, according to the investment firm Salomon Bros.

Among tax-exempt municipal bonds, general obligations declined 1/2 point and revenue bonds were down 3/4 point in moderate trading, according to Merrill Lynch & Co.

Yields on three-month Treasury bills were up 4 basis points to 5.76%. Six-month bills rose 4 basis points to 6.05%, and one-year bills rose 6 basis points to 6.30%.

The federal funds rate, the interest on overnight loans between banks, traded at 7%, up from 6.688% on Friday.