Bond Yields Drop After Auction : Market Overview

Bond yields declined in trading after a successful Treasury auction of new 30-year securities. In the government bond market, the yield on the Treasury’s main 30-year bond was 7.58%, down from 7.67% Tuesday.

* Stock prices bogged down despite the strong bond market and favorable news on employment.

Credit

“Today’s 30-year bond auction was a screaming success,” declared Peter McTeague, a market strategist at Technical Data in Boston.

In the third leg of its $37-billion quarterly refunding auction, the Treasury issued $10.25 billion in 30-year bonds at an average yield of 7.66%. That was the highest average in a year, but about what the market had expected. The yield was 7.29% at the previous auction in August.

The bid-to-cover ratio, a measure of market demand, was 2.49 to 1, well above the 2.11-to-1 average for the last 12 auctions, according to Dow Jones Capital Markets.

The long bond’s price, which rises when yields fall, was up 15/16 point, or $9.38 per $1,000 in face amount. In an indication that bidding was avid, the new securities were trading late Thursday on a when-issued basis at a yield of 7.57%, or up nearly a point.

The federal funds rate, the interest on overnight loans between banks, fell to 3%, down from 3 1/16% late Wednesday.

Stocks

The Dow Jones average, which had risen 14.86 points on Wednesday, slipped 0.54 to 3,239.79.

In the broader market, advancing issues just slightly outnumbered those declining on the New York Stock Exchange. Big Board volume came to an estimated 226.10 million shares, down from the previous session’s 243.75 million.

Brokers said stock traders found no surprises in President-elect Clinton’s midday news conference.

Stocks also received an initial boost on the signs of an improving economy.

Among the market highlights:

Drug stocks were broadly higher for the second straight session. Merck gained 7/8 to 45 3/4; Abbott Laboratories up 3/8 to 29 3/4; Bristol-Myers Squibb up 1/4 to 68 3/4 and Syntex up 1/2 to 26.

* Gap Inc. jumped 2 3/8 to 33 5/8 after the company issued a long-expected report of lower quarterly earnings.

* Lands’ End fell 5 5/8 to 24 1/4. The mail-order merchandiser reported a slight decline in net income and flat earnings per share for the fiscal third quarter ended Oct. 30.

* Diagnostek tumbled 3 7/8 to 6 7/8 as Medco Containment terminated a merger agreement with the company, three days after it said it was reassessing the deal. Diagnostek said it believed that Medco wrongfully broke the agreement.

* Charles Schwab Corp. climbed 1 1/8 to 24 1/2. The discount brokerage said it saw a 15% increase in trading activity last month from September.

Other gainers among securities-industry issues included Merrill Lynch, up 3/8 at 59 7/8, and Primerica, up 7/8 at 45 1/4.

* General Motors, which said it had set a 1993 target of break-even results before interest and taxes, gained 1/4 to 30 1/2.

* Shares of Ford Motor Co. gained 5/8 to 39 after the company announced that its president and chief operating officer, Philip Benton, will retire. Chrysler rose 1 3/8 to 27 7/8, touching a new 52-week high.

Overseas, share prices rallied on the London stock exchange, with the key Financial Times 100-share average up 29.60 points, or 1.10%, to 2,726.4.

Frankfurt’s 30-share DAX average rose 23.16 points to 1,535.37, its largest one-day gain in more than three weeks.

In Tokyo, the 225-share Nikkei average finished the day up 58.78 points at 16,376.

Currency

The dollar fell against most major currencies during trading described as uneventful.

The dollar closed in New York at 123.95 Japanese yen, down from Wednesday’s 123.975 yen.

The British pound rose to $1.529 from $1.525 the day before.

Commodities

A surge in silver futures prices led precious metals higher, extending their recovery from a tailspin that earlier this week took gold to its lowest level in nearly seven years.

On New York’s Commodity Exchange, silver soared 10.8 cents to $3.778 and ounce, and gold rose $1.50 to $333.20 an ounce.

Meanwhile, on the New York Mercantile Exchange, oil futures sagged extending a long-running downward trend tied to rising production of crude oil and the soft world economy. Light, sweet crude for December delivery fell 26 cents to $20.21 a barrel.

Market Roundup, D6