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Bond Prices End Mixed in Seesaw Trading With BC-Bonds-Glance

August 2, 1994

NEW YORK (AP) _ Government bond prices forfeited early gains to end mixed Tuesday in a market weighed down by worries about upcoming economic data and the Treasury’s semiannual sale of new notes and bonds.

The price of the Treasury’s main 30-year bond closed down 3-32 point, or 94 cents per $1,000 in face value. The yield, which moves in the opposite direction, edged up to 7.40 percent from late Monday’s 7.39 percent.

But prices of other maturities ended higher. Short-term Treasury securities rose 1-32 point to 1-16 point and intermediate maturities ranged from unchanged to 1-16 point higher, the Telerate Inc. financial information service reported.

The market’s mixed performance comes one day before the Treasury announces details of its semiannual sale of roughly $40 billion in new three-, 10- and 30-year securities.

Proceeds from the auction, scheduled for the three days beginning next Tuesday, will help fund payments on the federal government’s outstanding debt and replenish the Treasury’s coffers.

Analysts said worries about the market’s ability to absorb the new supply convinced some players to sell securities bought during Friday’s powerful rally, when the long bond’s price jumped nearly 1 3/4 points.

Market participants also fretted about July employment figures due out Friday. The statistics are considered a barometer of broader economic health, and many traders and investors are hoping to find further evidence that the economy slowed down this year.

One such indication came early Tuesday, when the government reported a sharp 14.1 drop in new home sales in June, triggering a jump in bond market prices in early trading.

Participants interpreted the statistics as the latest sign that the Federal Reserve’s multiple increases in interest rates this year are slowing down the economy as intended.

The housing report seemed to decrease the likelihood that the central bank will push rates higher again when its policy-making panel meets later this month. That helped bond prices because higher rates on new securities would hurt the value of bonds already sold.

But prices drifted back as enthusiam over the news faded.

″The market couldn’t sustain the highs, but there’s still a lot of optimism out there,″ said Frank Sannella, senior money market analyst at Technical Data Global Markets Group in Boston.

The Lehman Brothers Daily Treasury Bond Index, reflecting price movements on bonds with maturities of a year or longer, rose 0.37 to 1,223.34.

Yields on three-month Treasury bills were unchanged at 4.43 percent as the discount held at 4.33 percent from their level at Monday’s bill auction. Six- month yields were unchanged at 4.90 percent as the discount held at 4.73 percent from level at auction. One-year yields were down to 5.34 percent as the discount fell 0.02 percentage point to 5.08 percent.

Yields are the interest bonds pay by maturity, while the discount is the interest at which they are sold.

The federal funds rate, the interest on overnight loans between banks, was quoted at 4 3-16 percent, down from 4 7-16 percent late Monday.

In the tax-exempt market, the Bond Buyer index of 40 actively traded municipal bonds closed at 92 19-32, up 1/4 from late Monday. The average yield to maturity was 6.30 percent, down from 6.32 percent.

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