CREDIT : Bond Prices Drift Lower in Slow Trading

Bond prices declined in quiet activity Tuesday, as traders returned from the three-day holiday weekend without any strong conviction about the market’s direction.

The Treasury’s closely watched 30-year bond lost about 1/2 point, or $5 for every $1,000 in face value. Its yield, which is often an indicator of interest rate trends, rose to 8.87% from 8.83% late Friday.

The financial markets were closed Monday in observance of Independence Day.

Analysts said many investors remained on the sidelines in anticipation of Friday’s unemployment report for June.

“There’s no reason to do anything,” said Maria Ramirez, a managing director of Drexel Burnham Lambert Inc. “The market’s losing a sense of direction; people don’t know what to focus on.”

A weaker dollar on world currency markets and a recent purchasing managers’ report showing continued economic growth brought a negative tone to the market, analysts said. But “nothing really jumps out at you,” said Mitchell Held, chief economist for Smith Barney, Harris Upham & Co.

Signs of a strong economy are considered bearish for bondholders, who worry about increased inflation and rising interest rates.

In the secondary market for Treasury bonds, prices of short-term government issues declined by 1/16 point to 7/32 point, according to Telerate Inc., a business information service. Intermediate maturities fell by 7/32 point to 3/8 point, and 20-year issues dropped 7/16 point.

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

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, stood at 1,152.11, down 2.54. The Merrill Lynch Treasury bond index, which makes a similar measurement, fell 0.15 to 110.13.

Yields on three-month Treasury bills, meanwhile, slipped 2 basis points to 6.53%. Six-month bills edged up 1 basis point to 6.69%, and one-year bills rose 3 basis points to 7.02%. A basis point is one-hundredth of a percentage point.

The federal funds rate, the interest on overnight loans between banks, was quoted late at 7.75%, down from 7.875% late Friday.

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