30-Year Bond Auction Is Disappointing : * Securities: The poor demand pushes up interest rates and raises the cost of financing the U.S. deficit.

The Treasury saw poor demand for its sale of $10 billion in 30-year bonds Thursday, pushing interest rates up and raising the cost to the taxpayer of financing the huge U.S. budget deficit.

The auction produced a higher-than-expected average yield of 7.91%, down from 8% at the auction Nov. 7. It was the lowest rate since 30-year bonds averaged 7.87% on Nov. 14, 1989.

While 7.91% was a two-year low, it was higher than analysts had expected.

The bonds will carry a coupon interest rate of 8%, with each $10,000 in face value selling for $10,098.60.

Thursday’s lackluster response was seen as a blow to a Treasury plan aimed at stemming a rise in long-term market rates and cutting its own borrowing costs by reducing the size of the 30-year auction.

“I think the Treasury has got to be disappointed that their grand scheme did not work,” said Kevin Flanagan, an economist at Dean Witter Reynolds Inc.

About $10 billion in bonds were sold out of bids totaling $20.6 billion. The bond offering was reduced from $12 billion at the last refunding in a shift toward shorter-maturity debt to cut interest costs.

The sale, the last of a $36-billion, three-part quarterly refunding program, produced an average yield that was the lowest since the auction in November, 1989. Accepted bids trailed off to a high yield of 7.93%.

On Wednesday, the Treasury sold $11 billion in 10-year notes, with an average yield at a five-year low. The yield on the $15-billion sale of three-year notes Tuesday was the lowest since the government began selling notes 17 years ago.

Onetime big buyers--such as the Japanese--have not been aggressive investors because U.S. market rates are well below those of other industrialized nations.

With retail investors absent, trading firms had no choice but to let prices fall after results of the auction were announced.

Non-competitive bids, typically those placed by small investors, amounted to $376 million.

Although non-competitive bids have been lower--$199 million in August, 1991, for example--the sum was well below the $937 million placed in the previous auction last November.