CREDIT : Bond Prices Dip in Reaction to Economic Data

Bond prices finished mostly lower Tuesday, weakened by a new report on U.S. manufacturing showing that the pace of economic decline has slowed.

The Treasury’s closely watched 30-year bond fell 3/16 point, or $1.87 for every $1,000 in face value. Its yield, which rises when the price declines, increased to 7.99% from 7.97% on Friday.

The market was closed Monday for the New Year’s Day holiday.

Analysts said bond prices were tipped lower by a new report by the nation’s purchasing managers showing that the industrial economy slowed in December for the eighth straight month but at the lowest rate of decline in six months. The National Assn. of Purchasing Management, which charts economic trends by polling its members, said its index registered 48% in December, up from 46.6% in November but down from 57.3% in December, 1988.

“It indicates that the decline in the manufacturing economy has probably bottomed out,” said Elizabeth Reiners, a vice president at Dean Witter Reynolds Inc.

Bond traders believe that the Federal Reserve is more likely to relax credit and allow interest rates to fall if the economy is slowing. The report of a pickup in the economy led them to believe that the Fed would not push rates downward.

The federal funds rate, the interest banks charge each other for overnight loans, was quoted late in the day at 8.50%, up from 7.50% on Friday. Analysts said the steep jump was due mainly to technical market factors.

CURRENCY Dollar Makes Gains as Gold Declines The dollar ended the trading day with a strong advance against most major currencies despite reported efforts by the Federal Reserve to drive it down, particularly against the Japanese yen.

Gold prices declined following a mixed performance overseas.

On the Commodity Exchange in New York, gold bullion for current delivery settled at $399.60 an ounce, down $2.90 from late Friday. Republic National Bank in New York quoted a late bid for gold at $399.75, off $3.25 from Friday.

Although domestic and most European markets reopened Tuesday, trading was described as thin as Tokyo extended the New Year’s Day holiday and many offices in New York and abroad remained partially staffed.

Therefore, currency dealers said, it remained to be seen whether the dollar was on its way up again after an extended decline in the last weeks of 1989.

The dollar was selling at 146.15 Japanese yen in London late Tuesday, up from 143.40 in Tokyo last Friday. In New York, the dollar soared to 146.40 yen from 143.85 yen.

In London, one British pound cost $1.6115 late Tuesday, unchanged from Friday. Sterling fetched $1.6085 in New York, less than Friday’s $1.6105.

COMMODITIES Crude Oil, Gas Up; Precious Metals Fall Crude oil and gasoline prices rose sharply, as did orange juice futures, while precious metals fell sharply.

Crude oil and gasoline rose in reaction to production slowdowns, plus technically triggered buy signals.

Spot unleaded gasoline soared nearly 4 cents a gallon on the New York Mercantile Exchange to 65.69 cents, while the spot price of benchmark West Texas Intermediate crude surged $1.07 a barrel to $22.89.

Energy traders said gasoline futures started the rally as traders bought unleaded gasoline and sold heating oil. Forecasts for milder weather across the United States, which would reduce heating oil demand, encouraged selling, they said.

Last week’s crop-damaging freeze has left Florida, but orange juice futures continued higher out of fear the damage will produce shortages and higher cash prices, traders said. Florida produces about 70% of the U.S. citrus crop.

Frozen concentrated orange juice futures traded on the New York Cotton Exchange rose the 8-cent-per-pound daily limit again in deferred contracts. Spot January was up 4.60 cents at 170.25.

U.S. shortages spurred Brazil, a leading orange juice exporter, to raise prices, adding fuel to the futures rally, traders said.