CREDIT : Bond Prices Regain Ground After Early Dip

Bond prices finished unchanged to slightly lower Wednesday, as long-term maturities extended a decline touched off by the market’s poor reception to a government auction of 40-year bonds a day earlier.

But analysts said the market bounced off its lows of the day after a government sale of two-year Treasury notes attracted healthy bidding.

The Treasury’s benchmark 30-year bond, which lost nearly a full point on Tuesday, lost 1/8 point, or $1.25 per $1,000 face amount. Its yield rose to 8.40% from 8.39%.

Market watchers said the Resolution Funding Corp. had to pay higher rates of interest--an average of 8.60%--than had been expected to sell its $5-billion supply of 40-year bonds that were auctioned Tuesday to finance the thrift industry bailout.

Some analysts said the poor reception to the 40-year bond sale indicated that the government may have to offer higher-than-expected rates at its quarterly refunding auctions of Treasury issues in early February.

As trading resumed Wednesday, prices of long-term bonds continued to decline, with the 30-year bond off by about $3.40 for every $1,000 in face value at midday.

But prices improved in the afternoon session as the Treasury announced results of its auction of $10 billion in two-year notes. The notes were sold at an average yield of 8.21%, which was in line with expectations.

The federal funds rate, the interest rate banks charge each other on overnight loans, was quoted at 8.375%, up from 8.125% Tuesday.

CURRENCY Dollar, Reacting to Stocks, Ends Lower The dollar finished lower against most major currencies after dropping sharply and then bouncing off the bottom levels of the day as traders monitored volatile stock market trading.

Currency dealers said dollar selling started to abate as the stock market recovered from a deep early dive.

The dollar declined in Tokyo to 145.80 Japanese yen from 146.33 yen Tuesday. In London, it fell to 145.35 yen and in New York was quoted at 145.715 yen, down from 145.94.

In London, the British pound rose to $1.6555 from $1.6480 late Tuesday. A pound fetched $1.6525 in later New York trading compared to $1.6535 late Tuesday.

COMMODITIES Orange Juice Futures Plummet in Selloff Prices of orange juice futures plummeted on the New York Cotton Exchange in a selloff that was sparked by the stock market’s weakness and snowballed amid profit taking.

On other commodity markets, livestock and meat futures fell, and grains and soybeans were mixed.

Most contracts for future deliveries of frozen concentrated orange juice fell the permitted 5-cents-a-pound daily limit. The March contract, on which the price limit has been expanded to 10 cents because of the market’s recent volatility, plunged 9.35 cents to $1.9515 a pound.

The March settlement price was more than 10 cents below the record high settlement of $2.0535 scored by the same contract only four days earlier.

Wednesday’s action marked the sharpest downturn in orange juice futures since a Christmas freeze that heavily damaged the Florida orange crop and triggered a 64% rise in futures prices.

The slide began at the opening bell, which was delayed one hour by computer problems.