Treasuries freeze, anticipating jobs figures; long bond yields 7.33%.

Treasury market activity virtually ground to a halt and prices ended little changed yesterday as investors awaited today's April employment report.

The 30-year bond ended down 1/32 point, to yield 7.33%.

The jobs figures will provide the market with its first comprehensive look at the economy's performance in April and present the first concrete evidence of the pace of growth so far in the second quarter.

"The employment results will offer an opportunity to begin the process of measuring early second quarter economic performance against expectations," said Matthew Alexy, senior market strategist at CS First Boston Corp.

In general, market analysts believe that interest rates already reflect expectations of growth well in excess of 4% and that the Federal Reserve will adjust official rates to 5% some time in the future. Details of the employment report will give investors an idea of the economy's current growth rate and provide a glimpse into economic activity in coming months, they said.

For the April employment report, economists polled by The Bond Buyer generally expect non-farm jobs to increase by 150,000, manufacturing jobs to rise by 15,000, and the civilian unemployment rate to ease to 6.4% from 6.5% in March.

John E. Silvia, chief economist for Kemper Mutual Funds, said the nation's employment report will show substantial gains, including strong economic growth in the second quarter.

"April employment should be up by 160,000 to 200,000 or more," Silvia said. "The gain is even after the temporary loss of 50,000 to 70,000 jobs due to the Teamsters' strike."

Moreover, recent gains in the Help Wanted Index and the employment component of the Purchasing Managers' Survey both suggest a clear basis for a strong employment gain, Silvia said. Despite this month's gains, Silvia said he expects Friday's report to show an unchanged 6.5% unemployment rate.

Manufacturers contributed to April's employment increase by adding employees while maintaining a 42.2 hour factory workweek, he said.

A stronger dollar and slightly positive weekly jobs data gave long-dated Treasuries a slight lift yesterday. The market posted modest gains on a stronger dollar in currency markets and the weekly unemployment claims figure, which came in at 350,000, up 17,000, according to the Labor Department.

Players remained focused on Friday's employment report and lingering concerns that the Federal Reserve may raise interest rates before the May 17 Federal Open Market Committee meeting.

"Day traders are looking at the currency markets and the jobless data for direction, but longer-term people are waiting for the employment figures before getting involved," a head government trader said.

The long end of the Treasury market outperformed the rest of the curve as participants speculated that today's employment figures will support longer-dated paper. Traders reported accounts moving money out on the yield curve to avoid expected volatility in the short end.

Amid signs that the economy continues to expand and that the U.S. central bank will tighten credit again soon, few investors are willing to take positions in shorter-dated Treasuries.

"I think positions are close to home," said Tony Crescenzi, head of fixed income at Miller, Tabak, Hirsch & Co.

In futures, the June bond contract ended up 6/32 at 104.16.

In the cash markets, the 5 1/2% two-year note was quoted late Thursday down 3/32 at 99.08-99.09 to yield 5.88%. The 6 1/2 % five-year note ended down 2/32 at 99.01-99.03 to yield 6.71%. The 5 7/8% 10-year note was unchanged at 91.09-91.13 to yield 7.10%, and the 6 1/4% 30-year bond was up 1/32 at 86.28-87.00 to yield 7.33%.

The three-month Treasury bill was down one basis point at 4.11%. The six-month bill was down one basis point at 4.59%, and the one-year bill was unchanged at 5.19%.

Corporate Securities

Cyrus Vance, the court-appointed mediator in R.H. Macy & Co.'s bankruptcy case, said he has cleared Macy's, Federated Department Stores, and Macy's bondholders to submit reorganization proposals for Macy's.

Macy's creditors received competing reorganization proposals from both Macy's and Federated last week. Cincinnati-based Federated launched an unwelcome merger bid for its rival retailer in January.

Neither proposal has been embraced by Macy's junior bondholders, who have complained that the payout both companies are offering their group is too low.

Vance now has given bondholders permission to come up with a reorganization plan of their own. Meanwhile, Federated and Macy's are mulling revisions to their separate proposals, creditors said yesterday.

Vance told all three parties to submit their best and final proposals to him on Monday, May 9. The mediator then is expected to submit a proposal for bringing Macy out of bankruptcy to Judge Burton Lifland on May 13.

Macy's plan calls for two junior classes of bondholders to get the chance to buy 25% of Macy's equity when the retailer emerges from bankruptcy. Macy's filed for Chapter 11 bankruptcy protection in 1992.

Federated reportedly has proposed paying the bondholders $75 million on their $1.3 billion in claims.

Viacom Inc. filed a shelf registration with the Securities and Exchange Commission for up to $3 billion in senior debt securities, senior subordinated debt, and preferred stock.

Net proceeds will be used to repay, redeem, or repurchase the company's outstanding debt, make loans to subsidiaries, and for other purposes that may be specified in the company's prospectus, Viacom said. No underwriters were listed in the filing.

Rating News

Fitch Investors Service Inc. said it raised MCI Communications Corp.'s senior debt to A from A-Minus and removed it from FitchAlert.

MCI's F-1 rated commercial paper, which was not under review, is affirmed. The upgrade is based on MCI's strong cash flows, increased financial flexibility, and manageable pursuit of strategic investment opportunities. The credit trend is improving, Fitch said.

The rating agency said MCI has aggressively decreased leverage and improved credit quality. The company's debt to capital ratio at yearend 1993 was 35.4%, down significantly from 53.7% in 1992.

MCI has strengthened its competitive position in the long distance business and increased its market share, to 20% in 1993, for the fifth consecutive year. Total revenue grew 13% in 1993, mostly due to traffic volume growth. Solid earnings from operations and substantial debt reduction and refinancing improved MCI's ability to service interest costs.

Furthermore, MCI's strong operating cash flow and the additional infusion of cash from British Telecomm PLC puts MCI in a solid cash position. Through April, BT had already invested $830 million for a 5% ownership stake in MCI. BT is scheduled to invest an additional $3.4 billion for a total 20% ownership interest.

MCI's relationship with BT promotes the company's strategic goal of expanding in the international arena. MCI has also now positioned itself as a North American long distance provider through its alliance with Stentor in Canada and the more recent venture with Grupa Financiro Banamex-Accival [Bannaci] in Mexico, Fitch said.

Fitch said MCI has distinguished itself domestically with its marketing ability and product rollout. As part of that strategy, MCI entered into an alliance with NEXTEL Communications Inc., a specialized mobile radio carrier with broad geographical coverage in the U.S. MCI's ownership interest in NEXTEL will ultimately reach 17%. Treasury Market Yields Prev. Prev. Thursday Week Month3-Month Bill 4.11 3.95 4.106-Month Bill 4.59 4.41 4.591-Year Bill 5.19 4.95 5.192-Year Note 5.88 5.71 5.883-Year Note 6.21 6.05 5.215-Year Note 6.71 6.61 6.717-Year Note 6.76 6.66 6.7610-Year Note 7.10 6.99 7.1030-Year Bond 7.33 7.26 7.33Source: Cantor, Fitzgerald/Telerate

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