CREDIT : Bond Market Closes the Day Higher in Light Trading

Bond prices finished higher Tuesday in light trading as the market looked ahead to a report on the nation’s merchandise trade deficit.

The Treasury’s 30-year bond rose 7/16 point, or nearly $5 for every $1,000 face amount. Its yield, which moves in the opposite direction from its price, slipped to 8.99% from 9.03% late Monday.

Steven A. Wood, an economist for Bank of America Capital Markets Group in San Francisco, said the bond market took some encouragement from Nicholas F. Brady’s testimony before a Senate panel which is considering his nomination to succeed James A. Baker III as Treasury secretary.

Baker left the post in mid-August to head Vice President George Bush’s campaign for President.

Wood said there was some concern that economic policy-making would “continue to drift” as it has since Baker left the post.

But he said Brady’s remarks on the budget deficit, the savings and loan system and the international economy left bond traders with the impression that Brady intends to pursue the same policies as Baker.

The advance came in light activity, however, as many bond traders stayed out of the market in advance of the government’s report due for release today on the July trade deficit.

Many analysts are looking for new trade figure to be lower than June’s $12.54-billion imbalance.

Wood is looking for lower imports and a deficit of about $11.1 billion, slightly below the $11.5-billion to $12-billion imbalance that some other economists have forecast.

A lower deficit is generally seen as a plus for the bond market, but the report of a larger deficit has often sent bond prices skidding.

Yields on three-month Treasury bills fell to 7.38% as the discount fell 6 basis points to 7.16%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 8.063%, down from 8.125% late Monday.