CREDIT : Bond Prices Mixed; 30-Year Bond Edges Up

NEW YORK — Bond prices were narrowly mixed in light trading Thursday as investors nervously awaited today’s economic news, particularly the report on the U.S. trade deficit.

The Treasury’s bellwether 30-year bond rose 1/16 point, or less than $1 for every $1,000 in face amount. Its yield was unchanged at 9.17%.

A government report showing better-than-expected retail sales in June and an increase in the prime lending rate by major U.S. banks had no effect on trading, said Mitchell Held, chief financial economist for Smith Barney, Harris Upham & Co.

“The market didn’t care. Everyone’s waiting for tomorrow’s trade figures,” Held said.

The U.S. merchandise trade deficit in April narrowed to $9.9 billion, its best showing in three years. But some analysts have predicted that May’s trade report will show a widening of the deficit.

“And market participants are listening,” said Marilyn Cohen, president of the investment firm Capital Insight in Beverly Hills. “Their central focus is on commodity prices and on what’s going to happen tomorrow. Tomorrow should be a big day.”

The dollar has declined in the past in response to an unexpected increase in the trade deficit, pulling bond prices down. Bond investors fear a lower dollar will lead to inflation, credit tightening by the Federal Reserve and surging interest rates.

Treasury Issues Mixed

Cohen said investors generally ignored Thursday’s strengthening of the dollar and declining oil prices, but remained concerned about rising commodity prices stemming from the drought in the Farm Belt.

In the secondary market for Treasury bonds, prices of short-term government issues were 1/16 point lower, intermediate maturities were mixed, with some down 1/16 point and others up 1/32 point, and 20-year issues rose 3/16 point, according to the financial information service Telerate Inc.

The movement of a point is equivalent to a change of $10 in the price of a $1,000 bond.

The Shearson Lehman daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, fell 0.14 to 1,137.36.

Among tax-exempt municipal bonds, general obligations and revenue bonds were also mixed from 1/8 point lower to point higher. Trading was light.

Three-month Treasury bills rose 1 basis point to a discounted rate of 6.72%, for a yield of 6.92%. Six-month bills rose 3 basis points to a discounted rate of 7.01% to yield 7.36%, and one-year bills were up 4 basis points at 7.26% to yield 7.77%.

The federal funds rate, the interest on overnight loans between banks, was quoted at 7.75%, up from 7.50% late Wednesday.

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