CREDIT : Short-Term Bonds Make Move Not Seen Since ’82

Bond prices advanced Tuesday as the government began its regular quarterly sale of new securities by auctioning $9.76 billion in new three-year notes.

The Treasury’s benchmark 30-year bond climbed 9/16 point, or $5.60 per $1,000 face amount. Its yield, which moves in the opposite direction from its price, fell to 8.79% from 8.85% late Monday.

That left the 30-year bond trading at a lower yield than the three-month Treasury bill, something that hasn’t happened since April, 1982. The three-month bill yielded 8.82% in late activity, down from 8.83% on Monday.

Long-term rates normally are higher than short-term rates because investors demand a premium for keeping their money tied up longer. The reverse situation reflects, some analysts say, how the Federal Reserve has been pushing up short-term rates to keep inflation under control.

In the first stage of the quarterly auction, the Treasury sold three-year notes at the highest level for that maturity since August, 1985.

The average yield was 9.18%, up from 8.59% at the last auction on Nov. 8, 1988, and the highest since three-year notes averaged 9.53% on Aug. 6, 1985.

In the secondary market for Treasury bonds, prices of short-term governments rose 3/32 point, intermediate maturities rose by between 7/32 point and 11/32 point and long-term issues rose 19/32 point, according to Telerate Inc., a financial information service.

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

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, rose 2.84 to 1,139.85.

In corporate trading, industrials were up. Moody’s investment grade corporate bond index, which measures price movements on 80 corporate bonds with maturities of five years or longer, rose 0.29 to 300.26.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds rose 1/32 point. The average yield to maturity held at 7.57%, the same as late Monday.

The discount rate on three-month Treasury bills fell 4 basis points to 8.52%. Yields on six-month bills fell to 8.95% as the discount fell 8 basis points to 8.46%. Yields on one-year bills fell to 9.07% as the discount fell 6 basis points to 8.41%.

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 8.875%, unchanged from late Monday.