After advancing late last week, prices take one small step back.

Treasury prices fell slightly yesterday as the market consolidated after the rallies on Thursday and Friday.

Late in the afternoon, the 30-year bond was off 1/4 point to yield 8.49%.

Mondays are often quite in the Treasury market, and yesterday there was not even any economic news to inspire the market.

Participants may have been disappointed when there was no follow-through buying after the gains that occurred Thursday and Friday, traders said.

"Nothing really has gone, on," a government note trader said. "I think there was just a little bit of profit taking in an quiet market."

Today, the market will get an update on how the housing sector is doing from the May housing starts report.

Economists surveyed by The Bond Buyer on average expect a 3.1% rise in May starts, following the 6.2% increase in April.

Jay Goldinger, a principal at Capital Insight in Los Angeles, said the market would be sensitive to the housing permits number.

Mr. Goldinger said the market might also respond to comments by Fed officials. Four Fed policymakers are scheduled to give speeches or testimony today, including Fed Chairman Alan Greenspan, Governors David Mullin and John Laware, and Cleveland Fed president W. Lee Hoskins.

He said, though, that it was possible Treasury prices would drift until the market gets more exciting information.

"Most of the dealers I talk to are fairly neutral and markets tend not to move dramatically when people don't have positions," Mr. Goldinger said.

Treasury prices have fallen, and yields have risen, in recent weeks as a number of indicators showed the economy was beginning to mend. For example, yesterday's 8.49% closing yield on the 30-year is up sharply from the 8.27% yield a month earlier.

But many traders say they are still skeptical about an economic recovery. Some say they need to see more evidence and others suggest the May figures may have been distorted by the warm weather.

Robert Brusca, chief economist at Nikko Securities, is among the pessimistis. He said yesterday the recession will not end until early next year.

Despite some encouraging indicators, Mr. Brusca believes the economy is still struggling.

He is calling for a 1.1% rise in gross national output in the current quarter, followed by a 0.9% decline in the third quarter, and does not expect to see strong growth in the economy until the second quarter of next year.

"I'm not convinced it's a recovery yet," Mr. Brusca said. "I don't see a sector that's going to lead us into recovery."

In fact, two sectors that have underpinned the economy over the

Treasury Market Yields

Prev. Prev.

Monday Week Month

3-Month Bill 5.75 5.71 5.61

6-Month Bill 6.07 6.00 5.84

1-Year Bill 6.37 6.36 6.15

2-Year Note 6.97 6.95 6.82

3-Year Note 7.39 7.39 7.15

4-Year Note 7.58 7.56 7.35

5-Year 7.94 7.94 7.75

7-Year Note 8.17 8.16 7.95

10-Year Note 8.29 8.27 8.07

20-Year Bond 8.49 8.47 8.28

30-Year Bond 8.49 8.47 8.27

Source: Cantor, Fitzgerald/Telerate

last year, government spending and net exports, are likely to lose ground during the second half, he said. Exports will suffer because of slower growth worlwide, and troubled state and local governments will be forced to curtail spending or raise taxes.

Mr. Brusca is as optimistic on inflation as he is pessimistic on the economy.

The recession has not been short and shallow, he said. Instead, the economic disruption has been "substantial"; combined with the continuing economic sluggishness he expects, that suggests there should be good progress made on inflation.

Mr. Brusca expects the continuing weakness in the economy and further improvement in inflation will allow the yield on the 30-year Treasury bond to plunge to 7.10% and the fed funds rate to have fallen to 4.8%, by yearend.

The September bond future contract closed 3/16 lower, at 92 26/32.

In the cash market, the 30-year 8 1/8% bond was 1/4 lower, at 95 29/32-96 1/32, to yield 8.49%.

The 8% 10-year note fell 1/4, to 97 28/32-98, to yield 8.29%.

The three-year 7% note was down 3/32, at 98 29/32-98 31/32, to yield 7.39%.

Rates on Treasury bills were higher, with the three-month bill up one basis point at 5.60%, the six-month bill up four basis points at 5.82%, and the year bill four basis points higher at 6.01%.

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