CREDIT : Many Bond Holders Cash In After Rally

Bond prices retreated in a quiet session Tuesday amid profit taking and diminishing concerns that the supply of long-term issues might subside.

The Treasury’s 30-year bond declined 5/16 point, or about $3.10 per $1,000 in face amount. Its yield rose to 8.85% from 8.79% Friday. The bond market was closed Monday for Columbus Day.

Credit analysts weren’t surprised by the pullback, which was largely caused by bond investors eager to cash in quick profits from Friday’s rally, when long-term Treasury bonds jumped nearly 2 points, or $20 per face amount, based on fresh evidence that economic growth isn’t leading to acute inflation.

Separately, worries over the supply of bonds subsided as the Senate headed toward passing a package of miscellaneous tax provisions that would, among other things, eliminate the limit on the amount of long-term bonds the government may issue at 4.25% interest.

Still, “there’s complete apathy in the market,” said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc. She noted that a lower dollar and higher oil prices also had a depressing effect on the credit market.

Reiners predicted that the market would remain quiet until Thursday, when the Commerce Department is scheduled to report on the August trade deficit.

Federal Funds Rate Up

In the secondary market for Treasury bonds, prices of short-term governments fell between 1/16 point and 3/32 point, intermediate maturities fell between 1/16 point and 9/32 point and long-term issues were down 5/16 point, the Telerate Inc. financial information service reported.

In corporate trading, prices were little changed. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, fell 0.09 to 295.68.

Treasury bonds were down. The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 2.27 to 1,153.26.

Yields on three-month Treasury bills fell to 7.49% as the discount fell 1 basis point to 7.27%. Yields on six-month bills fell to 7.78% as the discount fell 2 basis points to 7.42%. Yields on one-year bills rose to 8.02% as the discount rose 2 basis points to 7.48%.

The federal funds rate, the interest on overnight loans between banks, traded at 8.313%, up from 8.188% late Friday.