CREDIT : Investors Look to Trade Data; Bonds Slip

Bond prices fell in cautious and lackluster trading Tuesday as most traders stayed out of the market, waiting for today’s release of trade deficit figures for November.

The Treasury’s key 30-year issue slipped 5/32 point, or about $1.50 per $1,000 in face value. Its yield crept up to 8.89% from late Friday’s 8.88%. The government bond market was closed Monday in observance of the birthday of Dr. Martin Luther King Jr.

Trading was very quiet Tuesday, on the eve of the scheduled announcement of the U.S. trade deficit for November.

“There’s an unwillingness to be involved in advance of such critical trade data,” said William V. Sullivan, director of money market research at Dean Witter Reynolds.

Economists expect that the November deficit widened to $11.3 billion from October’s $10.35 billion.

Trade figures can have a dramatic effect on the dollar, which the credit markets tend to track. If the foreign exchange markets are disappointed by the numbers, the dollar will decline and bond prices likely will follow suit.

Bond traders believe that the Federal Reserve is more inclined to drive up interest rates when the dollar is falling. Since interest rates and bond prices move in opposite directions, the Fed’s action would mean a drop in bond prices.

However, Sullivan said, even if the trade figures are negative, the bond market may not be hit badly because there is strong demand for government issues.

In the secondary market for Treasury bonds, prices of short-term and intermediate government issues ranged from 1/32 point to 1/8 point lower while 20-year issues rose 1/32 point, according to Telerate Inc., a financial data service.

The movement of a point equals a change of $10 in the price of a $1,00 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, fell 0.21 to 1,136.51.

In corporate trading, industrials rose. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, was up 0.36 to 297.11.

Municipal issues dipped lower. The Bond Buyer index of 40 long-term bonds fell 1/32 point to 92.125.

Some Yields Higher

Yields on three-month T-bills rose to 8.49% as the discount rose 2 basis points to 8.22%, six-month bills were unchanged at 8.82% as the discount rose 4 basis points to 8.35% and one-year bills edged up to 9.01% as the discount rose 3 basis points to 8.33%.

A basis point is one-hundredth of a percentage point. The yield is the annualized return on an investment in a Treasury bill. The discount is the percentage that bills are selling below the face value, which is paid at maturity.

The federal funds rate, the interest on overnight loans between banks, was quoted at 9.25%, up from 9% late Friday.